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European Communication Council - Report 1997 



EXPLORING THE LIMITS 




The centrality of communication technologies in our everyday lives can hardly be doubted. Nor can their cruciol importance in the 
continuous renewal and reinvention of how our societies work. However, while claims about what the 'information society' can offer 
us in terms of prosperity, abundance, pleasure ond democracy abound, we need to take a hard look end try to distinguish between 



the feasible and t he fantost ic. Almost inevitably, the Introduction and development of new technoloaies is occompanied by o high volume 
{has come to match political hype with regular pronouncements of fortncoming findings ana discoveries, of 



of hyperbol 
new equipment to attei 



sleep. Clearly, experience has toui 



most of life's chores, of coming cataclysmic changes in work habits, leisurejmejterhops even potterns of 



jht us to take most exooaeroted cloims with the traditiono ^ 
sceptical approoch. There are goocl grounds for this, as the nislory of technoloaical developmentsTn the communicotion field, as in most 
others, is led by initial misconceptions and thus is perhaps os much a history or failure rather thon of success. Probobly more inventions 
or innovations have gone down the drain thon those that survived. Even with successful innovations - e.g., the telegraph, telephone, 
radio, etc. - the envisioned p urposes Wjgrejiot reglised^ut. 

But as successful technologiesJJffi^Jj 
we tend not to register the catalogue ol 



grain of salt 



dnd to maintoin a proper 



other uses that emerged from experience with the new appliances. 



le hobits of the modern world, the non-starters hove quietly vonished, and 
_ in patterns of use have come obout when large numoers of people have 

adopted new equipment and services os replacements Tor olcler ones or by occepting totally new techndoaies for their estoblished 
behaviour. It is one thing to invent and proouce new technologies, but odoption occurs only when people really want or actually need 
them. Producers try to do this by morketing enhanced, odvancea, or even totolly new devices and procedures, only when there is a 
brood based recognition of genuine odded value. A good example is the so-callea 'picture phone' which has been offered repeatedly 



I based recognition of genuine odded value. A good example is the so-called 'picture phor 
since the early 1960's os a promising application. But each test trial has pr oven unsiK ce^TuI, moinly due to evidence of inadequate 
demand because people could not perceive enough added value. With the still|iQJ|^3j{i[^Qof signal compression on top, such trials 
moy re-surface yet again, so we may not have heard the lost from this front. In recent yearsVp tecnno-hype hos trumpets o number 
of potential wonders in television, oil still figments of the imagination at this time, rother than accepted practice. Promises of enhanced 
television picture and sound (such as High Definiti on end D 2 Moc) ar e still on the back burner, os is digital broadcasting. Interactive 
television (based on the digital format) still has an|j]|^jQQ|i|Q]^^ause it may conflict with rother thon enhance, the essential 
story-telling, entertainment role of television which is one ot its moin appeals. Video-on-demana is another highly touted benefit In 
the offing, out has yet to demonstrate its advantages over video rentols in a number of tests to dote, and there are some reosons to 
expect that It never will. Such exomples of the failed promises of techno-hype are numerous but, before we 'throw out the boby with 
the bath water' we must also odmit to a long list of oovious successful innovations (e.g., the VCR, CD, personal computers) where the 
hype turned out to be true. There is a tendency in some quarters to propound anti-techno-hype with the same intensity os techno-hype 





European Communication Council (ECC): Report 1997 

EXPLORING THE LIMITS 

Europe’s Changing Communication Environment 





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ECC 



iifiitm AN cowviMKKiioh cotMcn 
Report 1997 



EXPLORING THE LIMITS 



Europe's Changing Communication Environment 



Fellows of the European Communication Council: 

Axel Zerdick, Speaker 

Freie Universitat Berlin, Germany 

Philip Schlesinger 

University of Stirling, Great Britain 

Alessandro Silj 

ROMA - Research on Media Associates; 

Consiglio Italiano per le Scienze Social!, Roma, Italy 

Percy Tannenbaum 

University of California, Berkeley, USA 

Co-ordinating authors at the ECC Berlin office: 

Ulrich Thomas Lange 
Klaus Goldhammer 

E-mail: 

contact@ecc-report.org 

Supported by: 

MGM MediaGruppe Mixnchen, Munich 

ISBN-13: 978-3-642-64536-5 e-ISBN-13: 978-3-642-60746-2 

DOI: 10.1007/978-3-642-60746-2 

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Die Deutsche Bibliothek - Cip-Einheitsaufnahme 

European Communication Council Report 1997: Exploring the Limits - Europe’s Changing Communication 
Environment / The European Communication Council (ECC) (eds.). - Berlin; Heidelberg; New York; Barce- 
lona; Budapest; Hong Kong; Milan; Paris; Santa Clara; Singapore; Tokyo, Springer, 1997 

ISBN-13: 978-3-642-64536-5 

This work is subject to copyright. All rights reserved, whether the whole or part of this material is concerned, 
specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting and reproduction 
on microfilm or in other ways, and storage in data banks. Duplication of this publication or parts thereof is 
permitted only under the provision of the German Copyright Law of September 9, 1965, in its current version, 
and permission for use must always be obtained from Springer- Verlag or MGM MediaGruppe Miinchen for 
electronic rights. Violations are liable for prosecution act under German Copyright Law. 

© Springer- Verlag Berlin Heidelberg, 1997 
Softcover reprint of the hardcover 1st edition 1997 

The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply even 
in the absence of a specific statement, that such names are exempt from the relevant protective laws and regu- 
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SPIN: 10569991 




ECC 



The European Communication Council (ECC) is an independent group of scholars from different European 
countries and from the US. Communication experts with different backgrounds are invited annually to either 
serve as Fellows of the Council or to participate in its work as Invited Authors by contributing their views and 
the results of their respective work. 

The ECC’s objective is to discuss trends and issues in European communication and report on them for the 
leaders and visionaries in communication companies and for leading policymakers. The range of issues to be 
considered is not limited; to maintain clarity and impact, however, ECC reports are meant to concentrate on 
key trends and to underline those issues which deserve higher profile in future debates. 

The ECC is organised as an independent project at Freie Universitiit Berlin; its work is funded completely from 
private sources by MGM MediaGruppe Miinchen. 



6 



ECC .• 



Axel Zerdick About the ECC and this Report - 1 0 Hieses 9 

Philip Schlesinger, Alessandro Silj, Percy Tannenbaum, Axel Zerdick Emerging Issues 1 3 

Economic perspectives 

Summary 33 

Eli M. Noam Systemic Bottlenecks in the Information Sodety 35 

Klaus Goldhammer/ Ulrich Lange Tfie Internet - On ihe Verge of a Modem Sodety? 45 

Klaus Schrape/ Wolfgang Seufert The Economics of New Information and Communication Technologies 69 

Social perspectives 

Summary 1 1 1 

Roger Silverstone Mew Medio in Europeon Households 1 1 3 

Gerard Claisse Communication ond Decommunication 1 35 

Ulrich Lange Dedication - The Culture of Private Communication in a Reolm of Uncertarnty 1 49 



Poiq^rspectivM 

Summary 167 

Richard Paterson Policy Implications of Economic ond Cultural Volue Chains 1 69 

Antonio Pilati /Giuseppe Richeri Strategy Alliortces in the New Communication Enviionment 1 87 

Jens Gaster The Hormonisotion of Copyright and Reloted Rights 203 

Ulrich Wattenberg State Intervention - The Joponese [Kperience 219 

Hans J. Kleinsteuber / Marcel Rosenbach Regulotion in the USA - Lessons for Europe? 229 



237 



1 



List of Content 242 

About Facts & Figures 244 

Facts & Figures 245 

7 





• £CC .• 



Axel Zerdick 



About the ECC and this Report 



About a year ago Michael Wolfle of MGM MediaGruppe Munchen together 
with Birgit Hiither and Hans Lauber approached me first with a question, and 
then with an idea. The question was simple: what do European communication 
scholars and scientists know and think about the general trends that shape the 
development of communication, and what issues do they find of particular 
importance? Not surprisingly, the answer to this question had to be typical for the 
academic world: communication scholars - as their colleagues in other fields - 
specialise in many ways, and within each given field they tend to differentiate 
(and to disagree) rather than strive for common generalisations. 

Some visionaries in media and communication companies, however, are curi- 
ous about what communication science may have to contribute to their indus- 
tries’ future(s); the process of going through hundreds or thousands of interesting 
academic contributions, however, is simply at odds with their other obligations. 
This is where the idea came into play: it should be an interesting task for a group 
of experts to discuss trends and issues in European communication and report on 
them for the leaders and visionaries in communication companies as well as for 
leading policymakers. The term “European” in this context was meant to cover at 
least the main communication markets in Europe, but also include other 
European countries (within the EU or not) where interesting and important 
developments are taking place. It also was meant to signal a European perspective, 
differing from narrower national points of view, and with an outlook from 
Europe on developments in other countries (mainly in the US and in Japan). 

The range of issues to be considered in the beginning of this process has not 
been limited: communication technologies, their potential applications, and their 
actual uses; telecommunications, broadcasting (public and commercial), and 
printed media; economic aspects of markets, companies, and technologies; 
perspectives of communication companies, communication regulators, and 
communication science. The limits, however, had to come from our final objective: 
to maintain clarity and impact, the report would have to concentrate on key trends, 
and underline those issues which deserve a higher profile in future debates. 

To create such a report, three groups of scholars have been invited to co-oper- 
ate in different ways. As the first group, three independent scholars with inter- 
national reputations and from different academic backgrounds have been invited 
by me to serve as “fellows” of the European Communication Council. We decided 
early on that one of the fellows was to be a scholar from the United States, the others 
from important European countries: the co-operation of Percy Tannenbaum 
(University of California at Berkeley), Philip Schlesinger (University of Stirling, 




Axel Zerdick 
Speaker of the ECC 



Professor of Economics and Mass Communication, 
Freie Universitat Berlin 

Academic training in Electrical Engineering, Law and 
Business Administration in Germany and Canada; 
degrees in Business Administration (Dipl.-Kfm., 
1968) and Economics (Dr.rer.poL, 1970) at Freie 
Universitat Berlin. Professional experience in sys- 
tems analysis and data processing. Publications on 
media economics and communicotion policy. Has 
served on a number of state committees on media 
issues. Research and consulting for medio and tele- 
communication companies, German and foreign 
media-related agencies and state parliaments. 



9 




•• ECC .* 



Axel Zerdick 
Aboul ihe ECC and ifiK Repori 



UK) and Alessandro Silj (Research on Media Associates, Roma) has been the 
cornerstone of our work. In addition to exchanging texts (using new and old 
forms of communication technology), four meetings of three days each have been 
devoted to discussing key trends and issues as we saw them individually, and now 
see some of them in mutual agreement, as you can read in our common chapter 
on Emerging Issues. 

The second group of scholars to contribute to this report are authors with 
international reputation on their respective fields of work, who were asked by the 
Council to formulate the imminent results of their respective work and views for 
the specific purpose and format of the report. The discussion of these contribu- 
tions within the Council has been stimulating, and we are confident that they will 
also stimulate debate within the communication industries. We are most grateful 
to Eli Noam (New York), Klaus Schrape (Basel) and Wolfgang Seufert (Berlin), 
Roger Silverstone (Brighton), Gerard Claisse (Lyon), Richard Paterson (London), 
Antonio Pilati (Milano) and Giuseppe Richeri (Bologna), Jens Gaster (Brussels), 
Ulrich Wattenberg (Berlin and Tokyo), and Hans Kleinsteuber and Marcel 
Rosenbach (Hamburg) for sharing their ideas, insights and analysis. Two chapters 
have been written at our request by the third (small) group of contributors: Klaus 
Goldhammer and Ulrich Lange have been co-ordinating authors for the Council, 
making sure that things fit together, and giving creative input at every stage of our 
work. And as you now look at the final result of our co-operative efforts, two more 
contributions must be mentioned: Michael Zimmermann of MGM MediaGruppe 
Miinchen and Thomas Lehnert of Springer Publishing are responsible for the 
perfect professional appearance of this report. 

To call our group “European Communication Council” is quite a challenge, and 
in several ways. One problem, of course, is that we did not find a better term to de- 
scribe our objective (and ambition), and still want to make sure not to be misunder- 
stood as some form of official group created by political decisions or led by corpo- 
rate desires. Our relationship with MGM MediaGruppe Miinchen has - from the 
very beginning - been characterised by visible independence. Our relationship 
with European institutions is complementary (or rather complimentary), in three 
ways: first, we compliment (partly even admire) the important and successful work 
of European institutions, in particular that of the European Commission, the 
European Audiovisual Observatory, the European Information Technology 
Observatory, and also that of the European Institute for the Media - we have drawn 
on their work, and want to draw more of the deserved attention to it. Second, our 
work has been complimentary to the EU in the sense that it has been fully privately 
funded by MGM MediaGruppe Munchen - not a single EU-ECU has been spent 
on it. And third, our report is complementary to EU reports by not having to 
portray the full European picture, and by not having to include the specific points 
of view of European member states - both of which is reasonable and necessary 
for European institutions. We had the chance to discuss the issues independently 
of this - and hope that some of the results make stimulating reading. 



10 




ECC 



Axel Zf'rdkk 
Aboui the ECC and HiK iepm r 1 0 The^ 



10 Theses 



Some of our readers may want some additional focus in their reading. My first 
suggestion for this is simple: read the individual texts in the report - we have tried 
to enable focus at every step of our work. A second suggestion cuts across the 
texts: I have selected ten theses which are dealt with in one or more of our 
contributions, and which, of course, are personal selections for a debate which we 
still have to engage in. 



♦ Multimedia rhetorics suggest that Europe has already been through a new 
media revolution. Actual media usage in Europe, however, is still quite 
traditional. In Mid- 1996, only between 1 and 2.5 percent of the population 
used the Internet in European core countries like France, Germany or the UK, 
compared to more than 5 percent in the US. In terms of competitiveness, this 
is a problem; on the other hand, it also leaves room for shaping development 
in Europe. 

♦ The US dominance in the field of new communication technologies has led 
to a “reversal of the colonial complex” (Ulrich Lange) : now European decision 
makers tend to copy the American communication profile rather than to 
develop it independently based on their own cultural needs. However, 
European services with European content are developing, using new tech- 
nological tools creatively to strengthen the uniqueness and specificness of 
social and cultural variety in Europe. These developments should be 
supported by governments on all levels. 

♦ The bottlenecks in Europe are not technological - they are economical and 
political. Necessary deregulation has been artificially delayed. Inappropriate 
rates set by de facto monopolies interfere with the fast growing demand for 
online-connections. Deregulation alone will not solve these problems. The 
integrated approach of broadcasting and telecommunication regulation in 
the US should be a model for Europe, not to be emulated in detail, but as a 
source of inspiration. 

♦ The Internet was not built to incorporate all the new services which have been 
created for it since. If the Internet is to be used for telephony and even to listen 
to the radio in future it will implode. New backbones, new overlay-networks, 
Intra-Nets and new pricing mechanisms are emerging and will modify and 
replace the traditional Internet step by step. 



The media revolution in Europe 
has yet to come 



New European media need 
new European services 



Telecommunication services in 
Europe are still too expensive 



The traditional Internet will 
implode 



11 




ECC .• 



Axf^l 7^?rHick 

About the [CC and rhK Report - 10 Fhews 



A new European Extranet is 
needed 



The market potential of Multi* 
media is not limited to media 
budgets 



There is a future in television 
beyond Interactivity' 



Multimedia technologies can 
not solve all employment prob* 
lems 



Consumers will need protec- 
tion against abuse of micro* 
payments 



New media are a chance lor 
new entrepreneurs 



♦ Europe should take this opportunity to build a strong Pan-European infra- 
structure of its own. If more and more people try to explore the world of the 
Internet, the only chance to ensure a high performance network lies in a 
suitable design of a new network with a reasonable balance of regional and 
international traffic. The traditional Internet creates too much international 
traffic for local information desires. The European Community should invest 
in new mirrored Internet servers and decentralised databases with local, 
regional, national and international content, to ease and to speed up online 
usage in Europe. 

♦ Spending habits in existing “media” categories by definition cannot be a 
proper guide to estimates for expected spending on new ones. The constraints 
of the audiovisual and media expenditure concept are obvious when looking 
at the most successful innovations of the past few years: Personal computers 
in private homes, as well as equipment and services using the Internet, have 
not been paid for from ‘media budgets, and most likely not even by any 
‘budgeted’ part of household or personal expenditures. 

♦ New electronic media have more to offer than just simple mechanisms to dis- 
tribute and to select from a broader variety of traditional products. The desire 
of TV viewers in Europe to interact with their screens is overrated, whereas the 
wishes of a new generation to get interpersonally involved and connected is 
not yet understood. Communication without dedication is like knowledge 
without inspiration. 

♦ In terms of economic expectations, multimedia technologies carry the heavy 
burden of unrealistic growth and employment promises. Rationalisation and 
“self-service”-developments will continue to erode the basis for employment; 
slow development of multimedia technologies and services, however, would 
reduce potential positive effects. Enhanced products and value added services 
- including those of the multimedia industry, but also in other service areas - 
are the fields in which new markets and new employment opportunities are 
emerging. 

♦ People need and have a right to control their budgets and not to lose track of 
their spending in a flurry of ‘micropayments’ for new and old services. 
European politicians should protect their fellow citizens from the emerging 
dangers of a new virtual bankruptcy. 

^ Not media giants but unexpected newcomers and ‘nobodies’ have developed 
important segments in the present field of multimedia communications. The 
traditional media industry is facing additional entrepreneurial uncertainty: It 
is not yet sure what viewers will want to see, it is not clear which services 
consumers will use, it cannot be said today which offerings will be accepted. 
Alliances to share potential risks will not be sufficient to stabilise the present 
influence of traditional media companies. 



12 




ECC 



Philip Schlesinger, Alessandro Silj, Percy Tannenbaum, Axel Zerdick 



Philip R. Schlesinger 

Professor of Film and Medio Studies and Director of 
the Stirling Media Research Institute, Stirling Univer- 
sity, Scotland; also Professor of Media and Com- 
munication at Oslo University, Norvi/oy. 



Emerging Issues 




Philip Sdilesinget 



ibd Zefdkk 



Percy lomeobogm 



AlessandiD Silj 



“ I hf ccnlralily o\ cumiminic.ilion tochnoloj^ics in our owryd.iy lives am hiinlly 
be doubted. Xcjram iheir eriKi.il iinportanee in tbeauilinuoys renewal and reiii- 
venlion ol liow our societies work. However, while elainis abtait whal ibe 
‘intormaticm society' can offer us in lerins of prosperity, abundance, pleasure and 
democracy abound, we need to lake a hard look and try to dislin^uish between 
the feasible and the fantastic, ' 



Studied Philosophy, Politics and Economics at 
Oxford University (BA Hons); postgraduate research 
in Sociology at the London School of Economics 
(PhD, 1975). Fellow of the Royal Society of Arts 
(since 1991). Publications include articles and 
books on medio theory and media sociology, e.g. 
Media, State and Nation (London; Sage, 1991). 
Research and consultancy for different institutions in 
the UK and in Norway. 



Alessandro Silj 

Director of Research on Media Associates (ROMA), 
Secretary General of the Italian Social Science Council. 
Earlier positions include assignments for Euratom, 
Brussels (1 960-65), research at the Center for Inter- 
national Affairs, Harvard University (1966-68), 
member of the Work Group on New Communication 
Technologies, the Ford Foundation, New York (1 970- 
73), Trustee of the International Institute of Com- 
munications, London (1985-90), rapporteur at the 
Assises de I'Audiovisuel in Paris (1 989). Publications 
include numerous books and essays on international 
affairs and on communications, e.g. The New Televi- 
sion in Europe (London: John Libbey, 1993). 



Challenging the Techno-Hype 
Roads to Innovation 
Consumer Choice 
The Value-Added Focus 
The Internet 

The Economic Dimension 
Strategic Alliances 

The Role of Public Service Broadcasting 
The European Perspective 



14 

15 

17 

18 
22 
23 
26 
28 
29 



Percy H. Tannenbaum 

Professor in the Graduate School and Professot 
Emeritus of Public Policy at the University of Califor- 
nia at Berkeley. 

Academic training at McGill University in Montreal, 
Canada (B.Sc., 1948) and the University of Illinois 
(PhD, 1 953). Professor of Communication and Psy- 
chology at the Universities of Illinois (1953-59), 
Wisconsin (1959-67) and Pennsylvania (1967- 
1970). 1970 move to Berkeley as Professor of 
Public Policy and Director of the Survey Research 
Center. Publications include several books ond some 
110 articles. Over 200 invited lectures and several 
honorory positions at institutions in North America, 
Europe, Australia and East Asia. Consultontto various 
government, business and academic institutions. 



13 




ECC 



Schle^nger, Silt Tannenbaum. IwM 
Emerging 



Challenging the Techno-Hype 



Experience has taught us to take 
most exaggerated claims with the 
traditional grain of salt 



Adoption occurs only when 
people really want or actually 
need new equipment and services 



The centrality of communication technologies in our everyday lives can hardly 
be doubted. Nor can their crucial importance in the continuous renewal and rein- 
vention of how our societies work. However, while claims about what the 
“information society” can offer us in terms of prosperity, abundance, pleasure and 
democracy abound, we need to take a hard look and try to distinguish between 
the feasible and the fantastic. 

Almost inevitably, the introduction and development of new technologies is 
accompanied by a high volume of hyperbole. Techno-hype has come to match 
political hype with regular pronouncements of forthcoming findings and 
discoveries, of new equipment to attend to most of life's chores, of coming cata- 
clysmic changes in work habits, leisure time, perhaps even patterns of sleep. 
Clearly, experience has taught us to take most exaggerated claims with the tradi- 
tional grain of salt and to maintain a proper sceptical approach. 

There are good grounds for this, as the history of technological developments 
in the communication field, as in most others, is led by initial misconceptions and 
thus is perhaps as much a history of failure as of success. Probably more inven- 
tions or innovations have gone down the drain than have survived. Even with 
successful innovations - e.g., the telegraph, telephone, radio, etc. - the envisioned 
purposes were not realised but replaced by other uses that emerged from experi- 
ence with the new appliances. But as successful technologies progressively revol- 
utionised the habits of the modern world, the non-starters have quietly vanished, 
and we tend not to register the catalogue of failures. 

Changes in patterns of use have come about when large numbers of people 
have adopted new equipment and services as replacements for older ones or by 
accepting totally new technologies for their established behaviour. It is one thing 
to invent and produce new technologies, but adoption occurs only when people 
really want or actually need them. Producers try to do this by marketing 
enhanced, advanced, or even totally new devices and procedures, only when there 
is a broad based recognition of genuine added value. 

A good example is the so-called “picture phone” which has been offered 
repeatedly since the early 1960 s as a promising application. But each test trial has 
proven unsuccessful, mainly due to evidence of inadequate demand because 
people could not perceive enough added value. With the still newer technology of 
signal compression on tap, such trials may re-surface yet again, so we may not 
have heard the last from this front. 

In recent years, the techno-hype has trumpeted a number of potential 
wonders in television, all still figments of the imagination at this time, rather than 
accepted practice. Promises of enhanced television picture and sound (such as 



14 




"There is a tendency in some quarters to propound 
anti-techno-hype with the same intensity as techno-hype, which is 
probably just as misleading and futile in the long run. 



•• £CC .• 



klilesinger, Silj, Tannenbaurn, Zerdkk 
Emt jing If .uf 



High Definition and D2 Mac) are still on the back burner, as is digital broad- 
casting. Interactive television (based on the digital format) still has an uncertain 
future because it may conflict with, rather than enhance, the essential story- 
telling, entertainment role of television which is one of its main appeals. Video- 
on-demand is another highly touted benefit in the offing, but has yet to demon- 
strate its advantages over video rentals in a number of tests to date, and there are 
some reasons to expect that it never will. 

Such examples of the failed promises of techno-hype are numerous but, before 
we “throw out the baby with the bath water” we must also admit to a long list of 
obvious successful innovations (e.g., the VCR, CD, personal computers) where 
the hype turned out to be true. There is a tendency in some quarters to propound 
anti-techno-hype with the same intensity as techno-hype, which is probably just 
as misleading and futile in the long run. The healthy response to both is a proper 
dose of scepticism and a wait-and-see attitude. No one is forcing us, individually 
or as a society, to accept any innovation at first mention, hype or no hype. Most 
of us have learned to use the accumulated, sometimes contradictory experience 
of family, friends and neighbours before opting to lay down a significant sum of 
money for a brand-new technological wonder. 

Roads to Innovation 

Some years ago, a young graduate student at the University of Illinois, while 
working on a quite different assignment, started “playing around” (to use his 
term) with designing a means of accessing and browsing the Internet. The result 
was a research paper that drew the attention of a number of interested parties, 
along with attendant publicity for such a “discovery”. One such very interested 
party was a private. California-based, venture capitalist who had had a number of 
successes (and a few failures) investing in new technological developments. That 
investor placed a telephone call to the inventor inviting him to a joint meeting in 
California. This was the start of Netscape, which has a share of over 70 percent of 
the browser market, although it is being hotly pursued by other potential 
competitors, including mighty Microsoft’s own offering. A law suit has been 
entered to challenge Microsoft’s “unfair trading practices”. In this competitive 
battle a settlement, one way or the other, is still some time in the future. 

The Netscape case is a good example of the two main ingredients needed to 
launch an innovative technological undertaking - a novel idea that seems to fit a 
particular niche in the market, and investment capital necessary to transform that 
idea into an actual good or service. That transformation process is inherently 
risky (at least in financial terms) since one cannot be sure that an actual afford- 
able product will emerge within a reasonable time-frame, that the costs required 
can be reasonably met, and that it will prove to be durable in what is apt to be a 
highly competitive market. 



Failed promises of techno-hype 
are numerous, but there is also 
a long list of obvious successful 
innovations 



Innovation: the Netscape example 



15 




ECC .• 



S(hl«^nger. Silj, Tonnenbum, Zerdick 

Eme^qin-i ^ 



Venture capital can make the 
difference 



The financial infrastructure must 
foster risk-taking venture capital 
institutions, along with appro- 
priate tax incentives 



Without the necessary venture capital the innovation process is just another 
idea in somebody’s mind or on the drawing board. The process of converting that 
idea into reality requires many hours of designing, engineering, testing and 
retesting, making adjustments on the go, with ultimate success a hope rather than 
a reality. Until the product is placed on the shelf and attracts enough customers 
to warrant all that cumulative investment and effort, success remains uncertain 
and the possibility of failure ever-present. 

Someone has to accept the risks and make the necessary investment to get a new 
enterprise off the ground. As the Netscape example shows, an individual venture 
capitalist can make the initial difference - in that case with both the inventor and 
investor being highly rewarded. In time, when the technology appeared highly feas- 
ible, a public share offer was mounted (again with considerable hype, this time by 
market gurus) which provided a considerable amount of working capital. Despite 
a rather volatile market, characteristic of technology shares in general, subsequent 
investors have also been well rewarded, at least to date. 

In the U.S.A., at least, there has been a growth of venture capital firms 
specifically to play this role. As expected, these have tended to cluster around 
high-tech areas such as Silicon Valley, but are spreading to other areas with the 
growth of a specialised stock exchange (known as NASDAQ) that features 
relatively low- capitalised innovative companies, initial public offerings, and the 
like. Specialised mutual funds, focusing on high-tech share portfolios, either with 
a given industry or across a wider range of technologies, have also promoted a 
higher degree of public awareness and investment. 

Different financial institutions can also play the critical investment role. In 
many countries, where major banks have large shares in many of the main busi- 
nesses of the nation, they can act as catalysts for innovation, although large banks 
tend to be conservative in their investment strategy and generally risk- averse. 
Specialised investment banks can step into the breech at times, as can public share 
offers. For a given country to encourage technical innovations within its borders, 
it needs to create a proper financial infrastructure, one that fosters the presence 
of such risk-taking venture capital institutions, along with appropriate tax incen- 
tives and/or deferments. Without such an infrastructure, states or regional econ- 
omic actors (such as the European Union) are apt to have difficulty promoting 
high-tech entrepreneurship, if for no other reason than that incentives need to be 
provided for the inevitable financial risks. 

Not least, local, regional or national governments often play such a facilitating 
role, as when they seek to develop an “industrial policy” to foster certain devel- 
opments or, of course, when they already exist as whole or part owners of major 
businesses. In some countries, such as the U.S.A., government tends to take a 
more passive role, merely setting up a particular economic infrastructure and 
allowing entrepreneurial, tax and market mechanisms to create their own risk- 
taking environment and potential profit structures. To be sure, certain industry 



1 € 




ECC 



at 



In the end, it is the selective behaviour of individual households - 



whether to purchase a product and how it is used - that shapes ... the 
social effect of any new technology." 



ktile^ingef, Silj^ Tonnenbaum, Zerdkl 
Frr qintj If iut 



groups often intervene to petition governments to act on their behalf, particularly 
in international trade disputes and agreements designed to benefit specific 
industries (e.g., copyright and patent protection, open access to their own prod- 
ucts and brands in foreign countries, etc.). 



With some changes in scientific knowledge and technology, the responsible 
governmental institutions have to get involved in the decision process, including 
regulation, adaptation and implementation, because major public policies maybe 
involved. Most western countries have agencies and experts who can conduct 
appropriate policy analysis to evaluate both the benefits and costs of such major 
national or even international undertakings before they are adopted. 



The role of governmental insti- 
tutions: regulation, adaptation 
and implementation 



These generally involve an assessment of the legal, political, economic and 
institutional feasibility of various options for addressing a particular policy issue, 
with attention to how readily implementation can be introduced and a disci- 
plined attention be given to potential consequences, both readily apparent and 
unanticipated. Some countries, with a given kind of political structure and a 
sensitivity to certain risks, may opt to avoid, or at least defer, adoption of any of 
the available alternatives, while other countries, with a somewhat different set of 
risk assessments and a more interventionist political, economic and social 
environment, may move quickly into a major national effort to “take advantage” 
of some new innovation. These procedures generally include some variation of 
cost-benefit analysis with, as political life often dictates institutions, major weight 
given to political expediency and at least a short-term political pay-off 



Consumer Choice 

The decision process is not fundamentally different at the level of the indi- 
vidual consumer faced with the choice of whether or not to adopt a new service 
or product, when to do so, and whether it is affordable in their personal circum- 
stances. Because it is on an individual or family level the procedure involves more 
personal considerations which are likely to be more sensitive than assessments 
conducted on the wider level of a firm or a national polity. 

In the end, it is the selective behaviour of individual households - whether to 
purchase a product and how it is used - that shapes the later technological 
impacts and developments we tend to focus on when appraising the social effect 
of any new technology. In many such choices, individuals are guided by their 
personal perceptions of anticipated usage and value. To be sure, such personal 
behaviour is often based on the experience of others, the early adopters who serve 
as the initial test cases (the usual two-stage process of adoption and adaptation). 
As members of the mass market become more familiar with the newer products, 
they are in a better position to make their own decisions - although there are no 
doubt times when the early adopters may provide a misleading scenario for subse- 
quent followers. 



Individuals are guided by their 
personal perceptions of antici- 
pated usage and value 



17 




•• ECC .* 



Schle^inger, Silj, Tonnenbum, Zeidick 
Emi^rying h\uvs 



Major factor: the family budget 



Conflicting interests within a 
family 



The rational selective consumer 
can also be a more-or-less aware 
and responsible social citizen 



With such advance, if somewhat unstructured, information providing an 
input on potential benefits, the cost side of the equation has to be decided on a 
more individual household basis. The major factor here is, of course, the family 
budget and if funds can be allocated from savings or other budget categories for 
a new appliance or service. In this process, the second-stage consumers are often 
the benefactors of price reductions engendered by economy- of- scale savings in 
the product manufacturing and distribution process, with growing competition 
among both producers and sellers. Nevertheless there are objective constraints on 
the family budget and other planning variables for private expenditures that inevi- 
tably enter the picture, especially when substantial fund outlays are involved (such 
as for a personal computer for the home). 

There are factors other than finances, as well, involved here. For one thing, 
households are usually composed of more than a single person, so differential 
perceptions and anticipations of potential value may be involved. While the final 
decision-making power may rest with one or two individuals (e.g., the parents) 
the decisions of other household members (the children) will also play a role. A 
related factor is the individual time budget of each of the family members. Those 
with established obligations and a full leisure-time agenda may prefer - or may 
be persuaded to prefer - bypassing a new gadget because it will distract too much 
time from other required duties and chores. These are the occasions where 
uncomfortable trade-offs have to be involved, often ending up with the use of a 
new technology substituting for another, already established time allocation. 

Obviously, apart from individual consumer choices, other social and cultural 
factors may also enter this process. Some commentators (such as Silverstone in 
this volume) tend to emphasise a different model in which new types of mobility, 
domesticity, and interactivity become the primary influences on private home 
adopters and users. They raise the image of not only the rational selective 
consumer but also of the more-or-less aware and responsible social citizen. For 
such cultural theorists, a selection model based on individually atomised deci- 
sions, mainly because new technologies offer a greater variety of personal choice, 
is misleading. Rather, they favour a model where social relations within and 
outside the household unit and changing cultural trends - e.g., the alleged 
tendency of the younger generations toward new types of “Gemeinsamkeit” or 
the desire for more “dedicated” communication experiences (see Lange s chapter 
in this volume) - become the major determinants of adoption or non-adoption 
of new devices on the market. 

The Value-Added Focus 



Decisions at any level - that of the individual household, community groups, 
business firms or national policy - can vary along several dimensions. But, as we 
have already indicated, each involves a basic judgment of what, if anything, is the 
expected value contributed by a new good or service and how it is apt to affect the 



IS 




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Schte^nger, Silj, Tonnenboum, Zerdkk 

hn. ; ; f 



existing structure of the social unit involved. That can operate on several levels; 
while different classifications of each level are possible, the following may serve as 
a convenient hierarchy for present purposes. 

Sul>stiUili<in: Some new technology merely replaces well-established, familiar 
existing equipment and practices. Obviously direct replacement of one service for 
another, with no real change in any way, is a futile step so the new technology must 
offer some benefits, however minor in extent, to be taken seriously. The key ques- 
tion here is whether the substitution is better or cheaper in some way that is signifi- 
cant to the user. Earlier changes in the telephone set provide one useful example. 
Instead of the standard, black dial set, there suddenly appeared coloured phones 
with different designs and other different models for office and home were offered 
at extra cost. The basic technology did not change but the variation in appearance 
was enough to stimulate significant sales increases. In a short period, this gave way 
to button units but still with essentially dial technology, and again sales increased. 
Shortly afterwards, true digital sets were introduced, representing a more substan- 
tial technological change, along with the availability of a number of some innovative 
services, and these made for more substantial sales increases for new sets. 

Improvements m qualih Other examples illustrate the value-added nature of 
relatively simple, essentially substitutive technology introductions, but with more 
effect. Frequency modulation in radio significantly changed the nature of the 
radio signal and led to a rise in music listening due to better signal quality. The 
change to 33 rpm recordings also significantly enhanced the product. Even greater 
changes in this area were represented by the introduction of audiotape, and later 
CDs. Like the change to digital telephony, the technology of music reception was 
not a simple substitution but involved significant improvements in quality at each 
step along the way. 

However, even with simple substitution, as we have noted earlier, there are 
inherent costs that accompany the change, so that not all people can readily adopt 
them. We refer here not only to the added financial costs but, for some people at 
least, the mere burden of change: why do I need something different when I know 
how to use what I have? The basic approach is not to fix something that is not 
broken. There is accumulating evidence that for a significant number of indi- 
viduals - perhaps a minority, but still not an inconsequential number - change, 
in and of itself, contains some threatening elements and they would rather stick 
with the established tools and procedures. (Claisse’s chapter in this volume offers 
some relevant considerations in this regard.) 

I’ufianccd services: As noted above, the division between sheer substitution 
and some improvement is blurred because simple replication carries few if any 
incentives to change. In terms of the example noted above, such novel intro- 
ductions as the digital telephone and audiotape represented substantial bench- 
mark changes because they improved quality and the possibility of new experi- 
ences. 



Key question: is substitution better 
or cheaper 



Better radio signal quality signifi- 
cantly enhanced the listening 
experience 



19 




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ScMesinger, Silj, Timnen trauma Zefditk 
Emerging Issues 



The evolution of television 



The introduction of colour tele- 
vision 



Cable TV: the next significant step 
in development 



This is seen even more dramatically if we examine the evolution of television. 
To begin with, television in itself offered an entirely new dimension to home 
entertainment and enjoyment, which was probably a main reason it was so readily 
adopted and spread so rapidly. America, with its larger affluence and zeal toward 
entrepreneurship, jumped into the medium early (in the late 1940s and early 
1950s) but paid a price because the then available technology was relatively primi- 
tive. By the time European countries began broadcast TV, with developments 
delayed by World War II, the available technology had improved and they have 
enjoyed better signal quality ever since while the U.S.A. has been stuck with 
poorer signal quality because it had invested too much too early. 

A major innovation everywhere was the introduction of colour TV as a 
replacement for black-and-white sets. The initial cost differences were very 
substantial and colour did not catch on for a while. But, as the obviously enhanced 
appeal of colour programmes became apparent, as economies of scale lowered 
pricing, and, not least, as families had to replace their existing high-repair-cost 
older sets, colour sales zoomed. The change from old failure-prone vacuum tubes 
to electronic systems provided additional, even greater value-added improve- 
ments. 

Cable TV represented the next significant step in development. Actually avail- 
able (again, in relatively primitive form) in the early days of TV broadcast (to pull 
in signals from the metropolitan centres that had TV stations), cable TV appeared 
early and spread quickly, especially in places like Canada, where the vast majority 
of the population could be exposed to U.S. programming, thus offering a fuller 
menu of programmes. 

Various countries, the U.S. included, had serious misgivings about intro- 
ducing cable TV on a large-scale basis. This was due in part because of the power 
of the vested interests in broadcast TV (in both public or private systems), and in 
part because of a real or imagined fear that more TV availability was not good for 
the public welfare. This concern is particularly acute in the case of children, 
supposedly addicted to the boob tube, and hence representing such a vulnerable 
audience. Among other things, it has led to the introduction of so-called V-chips 
within the U.S. that parents can use to block out certain content from their 
children’s viewing. 

More recently, cable TV has experienced major growth for the simple reason 
that it has provided more channel capacity and hence supposedly greater diver- 
sity of offerings, in systems when there was relative scarcity and limited space in 
the spectrum. Cable TV does cost more but, apparently in countries like Canada 
and the U.S., the majority of the population (some 70% in the U.S. and over 80 
% in Canada) feel it is worth the added price ($25 - $30 or so per month on the 
average) even though the expected pluralism in programming is still not all that 
evident. 



20 




"curiously enough, in the case of high-definition TV, 
the U.S. originally departed from its usual policy of letting the 
entrepreneurs and the market adjudicate the process." 



ECC 



5<hlesjngef, Silt Tonnenbaum, Zerditk 
Fir:; giotj If ' 



This raises some rather interesting questions about the next promised signifi- 
cant change in TV broadcasting with the forthcoming introduction of high-defi- 
nition and/or digital technology. These changes involve substantial new invest- 
ment all along the production-dissemination-reception chain, and is not - at least 
not yet - such an assured improvement that the parties involved will make a suffi- 
cient initial investment to ensure that it has the chance to take off. Curiously 
enough, in this case the U.S. originally departed from its usual policy of letting the 
entrepreneurs and the market adjudicate the process. Instead it set up a special 
commission - along with a special testing laboratory - to investigate the matter 
in detail and to decide (actually only with the power to recommend) which of the 
various competing systems should be adopted. 

After extensive testing and deliberation, the commission issued its recom- 
mendations: 1) that only a digital system be considered (thereby eliminating the 
existing Japanese HDTV system); 2) that both digital and analogue systems 
should be available, either on a coordinated or parallel basis, so that viewers 
without new sets not be disenfranchised (the same as when colour was intro- 
duced); and 3) that since no single digital system was judged superior to the others 
at this stage, potential developers be encouraged to form a consortium or new 
company to develop a single system and single standard. 

The decision to go digital naturally attracted the interest of electronic chip and 
computer companies who argued vigorously to make the competition more 
open. The latest version (at the time of this writing, in late December 1996) shows 
a delicate compromise on single technical standards for both TV signals and CD 
quality sound, and an open environment where broadcasters, consumer elec- 
tronics, chip and computer manufactures can compete, and allow the market- 
place to decide which might succeed and which might fail. There is still much to 
be done in this area, of course - for one thing, the Federal Communications 
Commission must set aside part of the public airwaves for the new service and 
must issue new digital TV licences - and the announced target date of 1999 for 
initial broadcasts may just be more techno-hype. But clearly some headway has 
occurred, at least in America. 

While some of the promise of digital TV is in new services, such as in inter- 
activity and video-on-demand, the main decisive factor is apt to be whether signal 
quality is sufficiently improved to warrant the very substantial outlays of money 
involved by all parties. That introduces the additional important factor of whether 
the creative community is capable of coming up with new programming genres 
that will take proper advantage of the new digital technology. If we use the present 
cable TV programming schedule (in the U.S. at least) as a point of departure, it is 
estimated that anywhere from 60 percent to as high as 85 percent of available 
programming will not be significantly improved by the new technology. The chal- 
lenge then is whether new types of content, designed specifically to exploit digital 



High-definition and/or digital 
technology in television involves 
substantial new investment all 
along the production-dissemi- 
nation-reception chain 



FCC decision: a delicate compro- 
mise 



21 




ECC .• 



« 



Had the Internet been planned beforehand as a larger 



S(hlMing«f. Silj, Tonnenboutn. Ztrdkii 



global service, it would still be going through dozens of national 
and international commissions. 



The challenge: a new breed of 
producers who understand and 
appreciate the value-added 
potential of digital systems 



technology, can be produced to create a new demand of its own. That is probably 
up to a new breed of producers who understand and appreciate the value-added 
potential of digital systems, and whether such a community will emerge in time 
to stimulate the early sales which will set the pattern for later larger adoptions. 



One necessary readjustment: a 
new set of copyright protocols for 
the digital era 



The political role of the Internet 



The Internet 

The Internet is a most interesting and unusual technological innovation. It 
was largely unplanned to reach its present level, it remains without owners as 
such, and is still largely unregulated - at least so far. It is probable that had it been 
planned beforehand as a larger global service, it would still be going through 
dozens of national and international commissions, each eager to put their own 
stamp on its development, extracting one thing or denying another. While there 
are inherent conflicts to be fought out between open access and government- 
motivated activities (e.g., allowing pornographic materials, fool-proof encryp- 
tion, government eavesdropping) the Internet seems here to stay, although 
perhaps in somewhat different formats (e.g., a growth in Intranet, rather than 
Internet, activities). 

Any such large-scale development is bound to raise a variety of problems and 
readjustments, not the least of which is a new set of copyright protocols for the 
digital era. Again just as our manuscript deadline approaches, there is news of an 
international agreement among some 160 nations to extend copyright protection 
for print, art, software, and music to the Internet after a contentious round of 
sessions in Geneva. The various treaties agreed upon may well set the cornerstone 
of international economic law for the information and technological age of the 
21st century, but we have not heard the last word on this matter. 

The main stumbling block may be that such international agreements must 
now be approved by each of the national bodies before they can be implemented. 
The chapter by Jens Caster presents the problem facing the European Union, and 
the U.S. congress recently decided not to decide on a national, let alone inter- 
national, policy because it could not resolve the competing demands (each 
reasonably justifiable on its own) from the various involved constituencies - 
mainly between the hardware and software providers - each with important 
stakes in any final agreement. 

At the same time, a political drama is being played out on the streets of 
Belgrade, Serbia. As protests against the government’s decision to cancel the 
results of recent local elections (which tended to go against the ruling regime) 
were mounting in the Serbian capital, the government saw fit to squash the 
growing dissent by controlling all media reports of the protest marchers, 
including the shutting down of major radio stations. Along comes modern 
communication technology to the rescue: the protesters took to the Internet to 
spread their demands elsewhere in Serbia and to the outside world. 



22 




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Schlesinpr, Silj, fonnefibaum, Ztrditk 
Emerging Issues 



The Economic Dimension 



Whatever the technological base of new technologies, whatever their uses and 
applications may be, they cannot be developed and produced without economic 
reason coming into play. While the people and companies who create the prod- 
ucts and services of the digital economy may be motivated by fascinating tech- 
nological concepts and specific ideas of their potential usefulness, at least part of 
their motivation, and quite certainly most of their staying power, has to do with 
basic economic facts: an income is needed to stay in business; a decent profit to 
sustain development and growth, and of course a big success will mean big 
money. (Bill Gates probably is a case in point; while he is less admired for the inge- 
nuity of his software concepts or for the superiority of his company’s products, it 
is his skill in marketing and in creating a fortune for himself that is a major basis 
for his present status.) 

Information and communication technologies have been and still are impor- 
tant factors in any country’s military security. Government spending thus has 
provided the economic basis for many basic technologies in these fields. To the 
extent that these technologies and services are spinning off into the realm of 
everyday civilian life, extending into and converging with old and new media 
functions, the economic emphasis is changing. Government spending is driven 
mainly by the usefulness of applications within administrative processes or by 
considerations of more general concern like health and education and in terms of 
industrial and employment policies. Companies may or may not adopt new tech- 
nologies because of their perceived effectiveness in streamlining production and 
improving the quality of products; some new services have become possible only 
by these technologies, giving rise to new companies, even whole new industries. 
As previously discussed, consumers may be the most elusive lot: their demand is 
determined not only by their budgets and their spending habits, but also by the 
perceived added value of any new offering, and subject to unpredictable subjec- 
tive decisions. To manage and influence such decisions, of course, is the role of 
marketing. 

In terms of economic expectations, information and communication tech- 
nologies carry a heavy burden. During the last decade, “New Media” and later 
“Multimedia” have been the focus of expectations raised by companies, industries 
and governments in many countries. Reduced growth and rising unemployment 
create problems within industrialised societies that can no longer be overcome, 
not even sufficiently reduced, by traditional economic policies. Quite understand- 
ably, the market potential of such new concepts has been looked upon opti- 
mistically by those companies convinced of the attractiveness of their present and 
future offerings. Understandably too, but with less assurance, governments have 
seized the opportunity to create and nurture the belief that new technologies can 
solve employment problems in the near future. For Europe, as many as 15 million 
new jobs in this area have been predicted, and even a somewhat more serious 



Three levels of economic incen- 
tives 



Three areas of demand: govern- 
ments, companies, consumers 



Corporate and political hype on 
employment 



23 




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"predictions of media budgets meet a conceptual dilemma: spending 
habits in existing product categories by definition cannot be a proper 
guide to estimates for expected spending on new ones. 



S(hlesifiger, Silj. Tonnenlraum, Zerdttk 
t ■ jrqintj h 



Careful analysis of the economic 
potential Is sobering, but certainly 
not pessimistic 



The media budget approach is 
insufficient, and the personal 
computer is the best example 



study expects five million new jobs within the EU by the year 2000. Again, hope 
and hype maybe getting intertwined, and the ultimate success of these new tech- 
nologies and services may be endangered more by such euphemism and false 
optimism than by anything sceptics and critics can say or do. 

The chapter by Schrape and Seufert carefully analyzes the economic potential 
of new multimedia technologies in terms of market segments, growth and 
employment. In this field, the inadequacy of comparable statistical data within 
Europe has been a particular shortcoming; there should be more and better coor- 
dination of the kind that just has started between Eurostat and other agencies. The 
results of their analysis are therefore based mainly on the existing statistical frame- 
work that has been set up for Germany. These results are sobering to different 
degrees and to different expectations, but are certainly not pessimistic. Particu- 
larly for the growth and employment argument, it has to be kept in mind that 
there is an unavoidable systematic bias (“systematic asymmetry” in Zerdick s 
terms) in trying to balance negative and positive effects. Those mature products 
and industries most likely to suffer from substitution by new technologies are well 
known and relatively well documented in statistical terms, and as a consequence 
the negative effects are relatively easy to predict. On the other hand, new products, 
new services and new industries are harder to evaluate, and any prediction of 
their development must be regarded as relatively frivolous in comparison to that 
of more mature parts of the economy. 

Looking at the potential development of consumer markets, discussion has 
largely been focused on what is called “media budgets” and their development. In 
the “Facts and Figures” section at the end of this volume, there are some useful 
data on media expenditures, particularly those on audiovisual products which 
seem to be closest to new media in terms of their uses, and thus constitute their 
potential competition, as well as substitutes. These figures demonstrate a concep- 
tual dilemma: spending habits in existing product categories by definition cannot 
be a proper guide to estimates for expected spending on new ones. More precisely, 
they can only do so to the extent to which new products and services are no longer 
“new”. The constraints of the audiovisual and media expenditure concept are 
obvious when looking at the most successful innovations of the past few years. 
Personal computers in private homes as well as equipment and services using the 
Internet have not been paid for from “media” budgets, and most likely not even 
by any “budgeted” part of household or personal expenditures. Rather, they were 
probably paid for from other unbudgeted parts of disposable incomes, maybe 
competing with (and possibly substituting for) other gadgets, cars or travel. There 
is an optimistic note in this enlarged concept, but with our now familiar caveat: 
new products and services must be sufficiently distinctive, must have added value 
for the customer, should catch the imagination and fascination, or at least have 
“option value” in the sense that they offer potential choice. 



24 




ECC .• 



Schtesingei, Silj, Tonnenbiiuni. Znditlt 

t M : • )< ..;,A 



We have already noted that competition for consumers is a function of dispos- 
able income and willingness to pay and of “time budgets” for media and other 
different activities. An additional factor seems equally important : given that users 
do invest time in media consumption, there is growing concern in the industry 
that parallel activities as well as the actual zipping between and the zapping of 
programmes reduce the effectiveness of advertising, not to mention that of 
editorial content. This third level factor thus is essentially a matter of competition 
for attention. 

As Noam notes in his contribution to this volume, there is an interesting 
theoretical framework to explain competition for attention as well as potential 
strategies to cope. When the increase in information generated by various media 
exceeds the human potential to deal with it - “information overload” has become 
a conventional term to describe this development - something has to give. A 
useful concept borrowed from formal “information theory” focuses on the differ- 
ence between those parts of the message which are useful to the consumer (i.e. 
genuine “information”) and those other parts without relevance to the individual 
consumer’s needs and/or interests (so called “noise”). Several strategies to cope 
with both information overload or noise have been suggested, for instance, selec- 
tively shutting off attention by “closing and specialization”, splitting attention by 
“multitracking”, or focusing attention on those elements of the information flow 
that are filtered out by (or left over from) automatic screening processes char- 
acteristic of the human brain (or performed by software search routines). 



Three levels of competition: 
money, time, attention 



How to cope with information 
overload 



The economically most interesting strategy, however, has to do with pricing. 
Television and the Internet are commonly perceived as basically free services. In 
the case of television, indirect and collective forms of financing (advertising and 
the mandatory licence fee) prevail in Europe, making additional use by any indi- 
vidual consumer virtually free; in economic terms, “marginal costs” are zero. In 
case of the Internet, most of the infrastructure has been set up in previous years 
by companies and by governments for originally different purposes, whereas most 
of the content is provided either by the users themselves or by companies and 
government institutions as part of their public relations efforts. In many cases the 
people who use the Internet (young people in families, students, employees) are 
not those who pay the telephone bill for Internet access (parents, universities, 
companies). It is not surprising, therefore, that the real cost of the Internet is 
largely underestimated by its users and its proponents, and that some of the over- 
load problems of the system can be traced back to the perception (and in some 
cases the reality) of a free service. 



Television and the Internet are 
commonly perceived as basically 
free services 



Introducing and strengthening pricing mechanisms both in television and on 
the Internet will have three effects in economic terms. First, price differences will 
- as in other consumer-oriented industries - provide orientation and help deci- 
sion-making, thus likely leading to a reduction of information overload. Second, 



25 




•• ECC .* 



Siye^inger, Silj. Tannefibaum, ZerditI 
tmi i t|m() k iU(‘S 



Three effects of pricing mecha- following the example of traditional media, some new services will be geared to 
nisms providing screening and navigational functions (rather than additional content as 

such), thus creating new business opportunities. Third, the unavoidable exclusion 
of those people unable to pay may well stimulate public debate in some countries 
on which television content, what kind of Internet access and which services on 
this system are crucial for the functioning of a democratic society. This could lead 
to some sort of “universal service” regulations, and to governments subsidising 
certain types of content and/or paying for the use of multimedia by the poorer 
segments of the population - again creating some new business opportunities, 
and some new material for welfare economics. 

All of these potential developments will be shaped mainly by the strategies of 
individual companies, as well as alliances between them, and by regulatory and 
other government decisions regarding the multimedia industry. 



Tendencies toward convergence 
have blurred borders between 
sectors 



Convergence poses new chal- 
lenges 



Strategic Alliances 

In recent years, we have witnessed a flurry of takeover partnerships and 
merger activity between and within different sectors of the telecommunication 
industry. Such tendencies toward convergence have blurred borders between 
sectors, as when telephone companies position themselves as providers of images 
and information, or when broadcasters move into the business of new services, 
and when publishers run satellites. In this context what are the appropriate refer- 
ence points and criteria for European media groups and telecommunication 
companies to map their strategies? 

In the past, many broadcasters would also position themselves as producers 
and distributors (as when Canal-h produced their own decoders and, of course, 
programming). Cable operators or film producers would also buy shares in, or 
take a direct role in, the management of broadcasting companies, the logic of such 
strategies being the supposed economic benefits of vertical or horizontal inte- 
gration. Synergies and economies-of-scale were to compensate for the cost of 
such investments, at least in theory (in practice they often turned out to be quite 
negligible). Today, convergence poses new challenges. To the broadcaster who 
moves into production, production is not an unknown land. But the broadcaster 
or publisher who moves into on-line services will need to work with techniques 
which bear no resemblance whatsoever to the ones they used in the past. 
Furthermore the potential market will be determined by the number of outlets 
(personal computers), a factor outside their control unless they are prepared to 
invest in the computer industry and/or to become themselves operators or co- 
operators of on-line services. 

Until now, broadcasters have used on-line services mainly to experiment with 
new marketing strategies and to interact with their audiences (CNN, for instance, 
has used CompuServe to test audience response to one of its programmes). 



IB 




"occasionally (probably more often than one 
might suspect) other more subtle factors may play a major 
role, but their influence is hardly ever acknowledged. 



ECC 



S(h(esinger, Srij, Tonr^enboum, Zerdkk 

mi . .j iij 



Although the role of providers of content will continue to be by far the most 
congenial to the broadcasting industry (operators of on-line services need high- 
quality materials such as entertainment and news that would appeal to the public 
in order to promote their subscription campaigns), today other actors are calling 
on the broadcasters to play a more direct role in the telecommunication market. 
Hence, for instance, the alliance between Microsoft and NBC to produce a cable 
TV news service and to develop off-line products. 



New challenges to broadcasters 



In a rapidly changing environment of convergent sectors and interests, various 
telecommunication companies have emerged as the most determined actors in 
this new global strategy: MCI/BT, Sprint/Deutsche Telekom/FranceTelecom, 
AT&T/Unisource, IBM/STET, BT/Mediaset/Albacom are some of the mergers 
and alliances that are changing the map of the world s communication industry. 
One of the telco s assets, and one that can be specially appealing to many of their 
partners, apart from their financial resources and control of telematic networks, 
is their know-how in the management of large numbers of subscribers. 



As for broadcasters, their appeal to potential partners or buyers is unlikely to 
diminish in the near future, especially since they are now able to move into 
production and their weight and influence are apt to increase with digital televi- 
sion. Advertising revenues are another strong asset. Furthermore, broadcasters 
appeal to potential buyers not only as producers of entertainment, but also as 
distributors, at a time when distribution is perceived as the weak component of 
the new multimedia markets. Indeed this was one of the reasons why Disney 
invested $19 billion in Capital Cities/ ABC. 

Apart from any other motivations, risk sharing, the size of the capital available Main factors pushing toward joint 

and the experience needed to enter new markets, the uncertainties concerning the ventures 
production and marketing of new technologies are the main factors that push 
toward joint ventures. Deregulation is another factor (for instance, without it, 

Disney could not have acquired ABC in the U.S.) . It can also be a factor acting in 
the opposite direction: it has been argued that because of the more-or-less immi- 
nent end of monopolies (regional or national) in the telecommunications sector, 
or due to the uncertainty about future regulation, mergers are a defensive or 
preventive strategy to limit the damage that forthcoming changes may cause. As 
an analyst put it, commenting on the BT/MCI deal, it is “actually (like) a bit of 
seatbelt-fastening in advance of a bumpy flight”. 



Occasionally (probably more often than one might suspect) other more subtle 
factors may play a major role, but their influence is hardly ever acknowledged, 
simply because they would not fit into any rational choice theory or market 
research practice. These latent factors can have different names (“strategic 
insight” is one) but, in the end, what they amount to, basically is intuition and 
informed guess-work. Asked to identify their strategy, a senior manager of a large 
European media company recently commented (in private) about their invest- 
ment policy on the following lines: 



27 




ECC 



Schlesinger, Silj. Tontitn bourn. Zerditlc 

t mr t (jjdf: 



Strategic insight vs. guesswork 



Difficulties with mergers: different 
industries, different cultural and 
managerial traditions, different 
market experiences 



‘We look at the range of available options and make rough estimates of how much 
each would cost us. More importantly, we look at what our competitors are doing 
or may be doing. Then we play with “scenarios”, and, naturally, if a decision is 
taken, we would dress it up with the kind of prose our board likes to read, figures, 
graphs, etc. and quotations from outrageously expensive consultants” reports. 
However, in the end, our decision on what to do or not to do is based more on 
intuitive guessing than hard analysis. We may decide to put chips on several 
options at the same time, hoping that one at least will turn out to be the good one, 
and in the meantime we continue keeping an eye on other players’ bets. But, mind 
you, in order to play this game one needs money, lots of money”. 

Under the circumstances, in a field crowded with so many different, hetero- 
geneous actors, it is hardly surprising that many joint ventures look like “odd 
couples”. It may be too early to say, but the question can be posed as to whether 
these strategies are here to stay or whether they represent a transitional stage, 
dictated by the high degree of risk involved and the level of investment required 
in a market whose developments are still far too unpredictable. Presumably, many 
joint ventures will need relatively long running-in periods. When mergers involve 
companies from quite different sectors, with management and organisational 
structures from different cultural and managerial traditions, and different market 
experiences, difficulties are bound to arise, and in some cases, may lead to 
eventual de-mergers. 

The Role of Public Service Broadcasting 



In this global environment, public service broadcasters (PSBs) are also 
confronted by new challenges. At the same time, however, their financial resources 
and experience should allow them to play a major role in the shaping of future 
markets. In most large European countries PSBs retain audience shares of 
between 40 and 50 percent (the range is from 37% in Spain to 77% in Denmark) 
and in 1995 they represented 56 percent of the total turn-over in the entire Euro- 
pean Union television sector. They invest $10.5 billion every year in original 
production, according to European Broadcasting Union sources. 



Might new digital services change 
the very nature of Public Service 
Broadcasters? 



The main policy issue on the agenda of PSBs today is the extent to which they 
should become involved in new digital services and whether any such involvement 
- which would necessarily turn them into commercial players in a highly 
competitive market - might change the very nature of their role as public services. 
Private broadcasters contend public service involvement would represent a form 
of unfair competition on the part of broadcasting organisations that are funded 
either directly or indirectly by the state. This is essentially the same argument 
being used to challenge the right of PSBs to move into advertising. Others have 
argued that public service broadcasters should not feel immediately threatened by 
the new media as it seems likely that terrestrial television will retain the majority 
of the audience for quite some time to come. 



28 




•• £CC .* 



Schlesinger. Silj, Tann€nbaum, Zerdkk 



The European Perspective 



Clearly the potential role of the state in shaping telecommunication tech- 
nology development is a major one. In the European context this is complicated 
by the emergent proto-state status of the European Union alongside that of the 
continuing formal sovereignty of the national member states, and the European 
communication space needs to encompass both political levels. While the EU 
does not yet behave like a state, it does have considerable, and growing, compe- 
tencies in the field of communication. While still not a strong political power 
centre, and therefore not a coherent political actor on the world stage, this drift of 
powers to the supranational level is increasingly affecting what can be done at the 
national state level, and at the regional level. These tensions have surfaced, in 
recent debates, on the issue of “subsidiary” - the question of at what level inside 
the EU decisions should most appropriately be taken and implemented. 

In contrast to the relative novelty of the supranational space occupied by the 
EU, the role of the national state in the field of communications is hardly new. 
Consider, for instance, the part that state action has played historically in forming 
and/or in regulating a range of communications infrastructures, in shaping 
cultural policies, in structuring telegraphy and telephony, in promoting and using 
the cinema, in designing broadcasting systems and, continuing a centuries-long 
tradition, in devising legal instruments affecting the functioning of the press. It is 
only relatively recently - in effect, since the deregulatory wave of the 1980s - that 
telecommunications have disentangled themselves in most countries from the 
status of a public utility. Media and communications technologies and their 
market conditions have been, and continue to be, deeply enmeshed with the fact 
of statehood, whether this be in the increasingly rare form of public ownership or, 
now more commonly, in the shape of regulation in the public interest. 

The role of the state in communication needs to be placed within a number 
of other contexts which tend to fade into the background when economic and 
technological competition questions are placed centre stage. It is these concerns 
- interacting with political systems - that have latterly received attention in the 
reshaping of the communications environment. 

Perhaps often forgotten, but nevertheless fundamental, is the role of the state 
in national security - in policing the boundaries of the national territory; in deter- 
mining who are the friends, who the enemies; in monopolising and controlling 
the legitimate use of violence in a given society. Communication is profoundly 
linked to this national security function. This has been most clearly seen in the 
United States where numerous communications technologies - e.g. satellites, 
supercomputers, the Internet - have been developed within the orbit of the 
defence and national security structures of the military- industrial complex. 

Because the EU does not yet constitute a single, unambiguous, security order 
with a common foreign policy, communication and security policies are largely 



The role of the EU in communi- 
cations 



Traditional roles of the national 
states in communications 



29 




•• £CC .• 



Sfhleslnger, Sflj, Tannenbaum, Zerdt(k 
hTH»l(jitU| Isstir 'i 



Communication and security 
policies are largely left to the indi- 
vidual states 



Communication is a fundamental 
feature of the democratic order 



Intervention to encourage cultural 
diversity 



left to the individual states. Perhaps the Schengen Agreement - which has created 
a common space for freedom of movement between some EU countries but, at 
the same time, made the common external border less permeable - has gone 
some way towards institutionalising common patterns of discrimination between 
the home-grown and the alien, but obviously not yet enough to dislodge signifi- 
cantly the profound connections between national territory and national 
communications. 

The national security role plainly intersects with the broader political role of 
the state, that pertaining to the type of regime within which we live. In the inte- 
grationist framework of the EU all the constituent regimes claim to be demo- 
cratic, in that all have forms of representative government and constitutionally 
safeguard the fundamental human rights of their citizens - rights of assembly, free 
expression, dissent, and so forth. Communication is a fundamental feature of 
this order, most obviously so in terms of the place attributed in democratic 
systems to a free press and to public service broadcasting in enriching and enlive- 
ning a political culture of open debate. But questions of freedom of communi- 
cation do not stop with the mass media as usually understood. Increasingly, they 
are also addressed to the newer communications technologies and the extent to 
which these interact with conceptions of fully-functioning citizenship in an 
“information age”. Thus, questions of wider communicative democracy may also 
pertinently arise in relation to public access to the means of communication, 
whether this be to have certain minority views represented in the media, or a 
right to reply to comment on news reporting about individuals or groups, or 
whether this relates to the disposing of the necessary cultural competencies to 
make use of innovative information technologies. 

The political role of the national state in recognising internal differences and 
creating the necessary conditions for the diverse expression of distinctive interests 
- what is commonly referred to as a framework of political pluralism - is closely 
related to the expectation that the state protect diversity based in cultural differ- 
ences - e.g., ethnic distinctiveness, linguistic particularity, or regional specificity. 
It is not uncommon for such differences to bring about markets based in like- 
minded publics that, once they have been constituted as audiences, may sustain a 
diverse pluralistic media. Moreover, there is some scope for intervention, such as 
that undertaken by the EU and by some member states, in encouraging the 
capacity to broadcast material in lesser- used languages or for the creation of 
opportunities for ethnic minority media. 

In this regard, one pressing problem, addressed in Paterson’s chapter, is how 
the potential contradictions between the economic imperatives of communi- 
cation and cultural diversity might be constructively addressed. There can be no 
doubt about according a necessary importance to economic factors (as a field of 
competition for European enterprises in a global economy) but at the same time 
assigning a value to cultural considerations as comprising a domain that has econ- 



30 




•• ECC .• 



khlesinger, Silj. lonnenbaum, Zerdkk 
^ n Kjlntj [y,u 



omic consequences for enterprises and for states, but is not in itself reducible to 
pure economic interests. 

Arguably, the drift of EU policy in the past few years has been to privilege the 
making of an information society in which the needs for communication will be 
met by taking individual demand expressed in the marketplace as the basic 
measure of worth. This has been particularly evident in the vision embodied in 
the recent Bangemann Report, which somewhat crudely combines the creation of 
the necessary conditions for a world of “European champions” in media and tele- 
communications with clearing away the clutter of continuing difference rooted in 
the varied European cultures. It is based upon thinking of a single European 
market as a purely - or at the very least, predominantly - economic institution 
where barriers to entry and frictions need to be minimised in the interests of 
European competition on the world stage. 

This represents quite a significant shift from late 1993, when the EU appeared 
on the scene as a relatively coherent political and cultural actor during the 
concluding moments of the GATT negotiations. Organised to defend the 
“cultural exception” of audiovisual products, the EU (perhaps willy nilly) went to 
bat for a different agenda - that of seeing the culture of the moving image as a 
value in its own right, not just as a profitable business. 

It might justly be held that a defensive conception of European culture (based 
in subsidy and quotas) is not for long going to hold the line against new tech- 
nological developments in the field of communication. Nevertheless, it needs to 
be recognised that, at this juncture, the European market (just like every market) 
is a social institution, not solely a matter of economic exchange. It has been built 
by deliberate cooperation between the European states and it is shaped in part by 
the particularities of their peoples. There are frictions and resistances to any exer- 
cise that conceives of Europe’s communicative space purely as a market. These are 
rooted in the historical patrimony of cultural differences mediated, above all, by 
the very national states that comprise the European Union. So clearing the clutter 
of culture is no easy matter; it is tantamount to surrendering the union’s identities 
that make up the European mosaic. For the present at least, it is impossible to 
think of Europe either as a monoculture or as a culturally neutral space. Of 
course, this may well change over the long term, as the EU’s citizens begin to 
develop an identity of themselves as “European”, in contrast to the nationals of 
given states that largely monopolise their loyalties. 



The drift of EU policy in the past 
few years has been to privilege 
the making of an information 
society 



Frictions and resistances are 
rooted in the historical patrimony 
of cultural differences 



31 





If, 



For the present at least, it is impossible to think of Europe either 
as a monoculture or as a culturally neutral space/^ 




Differences of emphasis in the 
views expressed 



The above pages have reflected the deliberations of the European Communi- 
cation Council at meetings held over the past year. As they are the outcome of an 



unresolved debate that still continues it would not surprise us if the reader were 
to detect differences of emphasis in the views expressed. For instance, we have 
grappled with the proper roles of market and state in the media economy, the 
point at which public policy concern becomes relevant, the value that should be 
assigned to entrepreneurship and consumer sovereignty and asked what may be 
some of the most pressing priorities for communications in Europe. If we have 
not been seamlessly univocal in our introductory remarks, we have nevertheless 
provided an accurate account of the issues debated. 

We move now from this collectively authored opening chapter to those offered 
by authors who may speak quite unequivocally, and unabashedly, for themselves. 



32 




ECC 



Economic Perspectives Summary 




The dawn of the “multi-media” age has both huge potential and enormous draw- 
backs - for providers as well as consumers. According to Goldhammer and Lange, the 
media are undergoing a process of “privatisation” in terms of content production. 
They believe that from TV talk shows and “video diaries” to call-in talk radio and 
online chat groups the professional use of content provided by private people has not 
only led to a broader scope of topics, but also to a more banal range of subjects. 

Compared with developments in television, Goldhammer and Lange argue that 
the Internet seems to be “the next step” towards more involvement and participation 
of the user, though the potentially fatal hurdle of system overload lies not too far down 
the Information Superhighway. They say the slowness of data-distribution on the 
Internet is more than a set-back: it could potentially hinder any mass appeal. “The 
WWW as an acronym for ‘World Wide Waiting’ is not only a bad joke but a deeply 
frustrating experience.” They warn that the Internet is close to implosion. 

For Goldhammer and Lange, those serious bottleneck problems must be solved 
if the Internet is win broader appeal and maximise its impact. Europe, they warn, is 
also in need of new tariff structures and more user-friendy Internet interface tech- 
nologies if the Internet is to grow beyond its current level of appeal to the relatively 
small number of the technoliterate. The economics of the Internet also depend on the 
ironing out of such bottlenecks. 

Though the “killer application” of the Internet so far has been e-mail, their prog- 
nosis is that the next step could see the Internet becoming “the first fully private 
denationalised trading and exchange system,” both for consumers and businesses. 
However, they caution that while opening opportunities for business around the 
world, digital cash or “e-cash” could also pose serious threats to the world economy. 

As yet, the main contribution of the Internet has been to amplify the exchange of 
information on a massive scale. For Eli Noam, this development has major drawbacks; 
the main one being that consumers will begin to switch off, drowning in information 
overload. Eor him, the major question is how to process and target that flow. “Almost 
anyone can add information. The difficult question is how to reduce it.” 

Noam argues that society has already evolved a variety of coping strategies - either 
by filtering out media messages, including advertising, by “selective attention, stereo- 
type, even prejudice”, or by increasing specialisation. 

While Goldhammer and Lange foresee great potential for Internet marketing and 
new forms of on-line commerce, Noam focuses on how consumers can fight back 
against unwanted information overload. He has a radical solution: “We are being 



33 



ECC .• 



EccNKMnic Pinp«(lfv» Summery 

Abundance and Sottlenecks 

inundated by junk e-mail, each piece imposing some time cost to us, yet outside of a 
price mechanism. Why is our time a free good for anyone who wants to access our 
mailbox or telephone receiver? Let them pay for access-individual customers could 
set different price schedules for themselves, based on their privacy value, and even the 
time of day.” 

Noam concludes that the emerging information technology will affect society far 
more deeply than many believe. “When the automobile was introduced, it was thought 
of as a horseless carriage. But it did not stop there. Now, our cities, family structures, 
work and neighbours are changed. The revolution in information transport will have 
a similar impact that the earlier revolution in physical transport had.” 

And, just as the arrival of the automobile had a massive impact on growth, 
employment and mobility, the new information and communication technologies 
also provide opportunities for growth and jobs. The question is: to what extent? 

Schrape and Seufert tackle the complex questions of just how much growth and 
what kind of new jobs will be created, in particular in Europe. They analyse conflicting 
studies and balance the over-optimists’ predictions with the sobering realisation that 
for many new jobs gained within new technologies, some others in the “old media” 
will inevitably be lost. Expectations in political circles (grappling with 18 million regis- 
tered unemployed in Europe) may well be far too hi^, as Schrape and Seufert note 
that the media and communication sector is characterised by continuous productivity 
growth, so that in future, the same value added can be generated by fewer employees, 
a development already obvious in telecom, postal and data-processing services. 

The sobering conclusion is that - despite predictions of rapid growth - those 
actually employed in the so-called information sector in 1993 were a mere 3.1% (as 
calculated by the European Commission), giving lie to the belief that the media and 
communication sector has already drawn level with the automobile industry in terms 
of economic importance. 

According to Schrape and Seufert, many constraints will affect demand for new 
media services; for example the political and legal frameworks under which providers 
must operate, and just as crucially, consumer acceptance of those services. They note 
the striking differences in Europe alone between the levels of acquaintance with the 
Internet, PC endowment, and in the acceptance of pay TV. According to their 
research, “the broadest possible potential acceptance for multi-media goods and 
services in Germany - at present and in the coming years - applies to around 45% of 
the adult population”. 

It seems that Europe’s slow but steady steps into the “modem society” are still in 
their infancy. So, while there’s ample reason for optimism for business and consumers 
alike, many constraints and bottlenecks must first be removed if Europeans are to 
break through the barriers to the brave new world of multimedia. 



34 



ECC .• 



Eli M. Noam 



Systemic Bottlenecks in the 
Information Society 



'As wc nuivc \ ro\n ilif Imditional siliuitimi inlc^niKilion Mjarcilv 
Ici a new aiid unlamiliar era of in for mat inn abimdaiKC, vve must 
he vsillinj; to ctHiskicr new approaches lt> information. ... ft our 
individual and orjianisalimial aUeiUioti is a limited resource, why 
should it not he allocated as other scarce commodities are? ' 




Eli Michael Noam 



Professor of Finance and Economics at the Columbia 
University Graduate School of Business and Director 
of the Columbia Institute for Tele-Information. 

Harvard University degrees AB (1970), PhD in 
economics (1975) and a JD law degree (1975). 
Publications on domestic and international tele- 
communications, television, information and regula- 
tion subjects, e.g. Telecommunicotions in Europe 
(Oxford, 1992) and Television in Europe (Oxford, 
1 992). Member of the New York and Washington 
D.C. bars. Served as Public Service Commissioner of 
New York State, as a board member for the federal 
government's FTS-2000 telephone network, the 
IRS' computer modernisation project and the 
Notional Computer Lob. 



The Paradox of Information Technology 36 

Response 1: Increased Heat 39 

Response 2: Closing and Specialisation 39 

Response 3: Reorganisation 40 

Response 4: Automatisation 41 

Response 5: Multitracking 42 

Response 6: Using Economics as a Screen 43 

Conclusion 44 



35 



•• ECC .• 



SysJamk Bonltt>Kks in ihi hformaHon Soduty 

Eli Ml Uoam 



Information Technology paradox: 
more knowledge but less control 



How will we process available 
information? 



The Paradox of Information Technology 

Sometimes the worst that can happen is to get what one wants. And perhaps 
this is happening to us with the revolution in information and communications. 
While this revolution is progressing quite successfully, success, just as failure, has 
a way of creating its own problems. 

We live in the information age, work in the information economy, and are 
surrounded by an information technology of astonishing performance and price. 
And yet, with all these technological marvels, we feel less than ever in control of 
information. 

This may be called the Paradox of Information Technology: the more infor- 
mation technology we have and the more knowledge we produce, the further 
behind we are in coping with information. We invent and build new technologies 
to help us, but they set us back still more. 

Why do we have such a problem? The reason is that we have created a systemic 
imbalance in the information environment of the kind that leads to new bottle- 
necks. A communications process, to simplify considerably, consists of three 
major stages: the production of information, its distribution, and its processing. 
These three elements have to exist in some relation to each other. 

In recent decades, technology has made giant strides in the distribution end 
of information. We are near the point, historically speaking, when the cost of 
information distribution becomes both negligible and distance-insensitive. 
Distribution has contributed, in an interrelated fashion, to the production of 
information, which has been spurred by the evolution of advanced economies to 
services and knowledge-based manufacturing. One of the characteristics of 
post-industrial society is the systematic acquisition of and application of 
information which has replaced labour and capital as the source of value, 
productivity, and profits. The weak link in the chain is the processing of the 
produced and distributed information. These bottlenecks are both human and 
organisational - the limited ability of individuals and their collectives to mentally 
process, evaluate, and use information. The real issue for future technology 
therefore does not appear to be production of information, and certainly not 
transmission, but rather processing. Almost anybody can add information. The 
difficult question is how to reduce it. 

There is a reinforcing relationship between the stages of information: 
production, distribution, processing. If I produce a piece of information, it will 
stimulate distribution and use. Similarly, distribution increase stimulates 
information production and processing. And information production creates 
demand for still more such production. The relationship between the stages of 
information with each other and themselves can be summarised in an input- 
output matrix, in the same way as has been done in the past for the interaction of 



36 



•• ECC .* 



industrial production such as for steel, coal, electricity, etc.. Where bottlenecks in 
growth occur, they are likely to have ripple effects throughout the other stages and 
beyond. 

In the past, the three stages of information grew slowly and more or less in 
tandem. By sometime following World War II, the parallel trends diverged, and 
things have never been the same. The driving technologies were advanced by that 
war - computers (from code-breaking efforts); microwave transmission (from 
radar technology); satellites (from missile development); and television (from 
superior electronics). 

The production of information in the U.S. economy rose at a rate of about 6%, 
and the growth rate is itself increasing. Distribution is growing even faster, by an 
estimated 10% and more. The rate of increase in processing capacity needs to 
keep up with that. To reach a similar growth rate is very hard, and is not being 
achieved. It is hard, because of the limited capacity of the processing channels of 
individuals and organisations, and the difficulty of increasing it. 

This has serious implications. Virtually all aspects of society are changing due 
to that imbalance, and in the ensuing attempts to adjust the individual and social 
processing rates of information to the demands that growth in the other stages 
have put on them. 

We all know that the quantity of information and of information producers 
has grown prodigiously. It has been said that 90 percent of all scientists who ever 
lived live today. The same holds for other information professions such as lawyers, 
journalists, or engineers. The number of scientists and engineers in the U.S. grew 
from 557,000 in 1950 to 4,372,000 in 1986, an increase of nearly 800%. By the late 
1980s, their numbers roughly equalled the entire information workforce of 1900. 

Most branches of science show an exponential growth of about 4-8 percent 
annually, with a doubling period of 10-15 years. To get a sense of the trend: the 
number of chemical abstracts took 32 years (1907 to 1938) to reach one million. 
The second million took 18 years; the third, 8; the fourth, 4 years 8 months; and 
the fifth, 3 years and 4 months. If we assume that before 1907 a full million of 
chemistry articles had not been produced, this means that in the past 2-3 years 
more articles on chemistry have been published than in humankind’s entire 
history before the 20^h century. 

A weekday edition of The New York Times contains more information than 
the average seventeenth- century Englishman came across in a lifetime. The 
Sunday edition far exceeds that. 

For all the talk about “paperless” offices due to electronics, the per capita paper 
consumption in the United States has increased from two hundred pounds in 
1940 to six hundred pounds in 1980. Ten years later, per capita paper con- 
sumption had tripled again. 



Sy^ttmk Bottfemcks In ths Infoimolion Socitty 

Eli M. Noam 



Imbalances in processing the 
increase in produced information 
increase 



Information output of sciences 
accelerates exponentially 



17 



ECC .• 



Sjfflsmie lott1*ii»tks in thi inlofmation 

Eli M. Noam 



A growing amount of noise 
accompanying information has to 
be filtered 



Information as a counter-force to 
entropy in communication 



In 1991, Congress received more than 300 million pieces of mail, up from 
15 million in 1970. In 1980, 5 billion catalogues were mailed in the United States, 
50 catalogues for every person. By 1990, the number was 12 billion. In the 1980s, 
growth of third-class bulk mail (junk mail) was thirteen times faster than 
population growth. An average upper business manager received more than 
225 pieces of junk mail a month. The number of satellite-delivered channels 
increased from 4 in 1976, 43 in 1983, to 112 in 1995. This trend continues 
unabated. In 1992, 20 new programme channels were offered to cable operators, 
and in 1994, over 70. 

The growth of mobile communications provides much wider and more 
convenient reach in terms of time and place. In the past, one could be reached by 
phone only near a wireline, which covered in geographic terms only about 2% of 
the land area of the U.S.. Now, radio-based communication ends most white 
spots on the map of communications ubiquity. 

The quantity of information is most pronounced in big cities. One estimate is 
that in a metropolitan area like San Francisco, people receive about 100,000,000 bits 
per capita per year, 100 times as much as in a place like Addis Ababa (with less 
literacy). The “symbol economy” makes the physical economy look puny. In New 
York City, the CFIIPS communications network transfers $1.5 trillion in financial 
transactions per day. In London, foreign exchange transactions exceed $100 billion 
a day. A single day s trading in London is about to exceed the annual GNP of the 
United Kingdom. 

A critical point is that information is always accompanied by “noise”. In 
technical terms, noise is the interference in a channel with the primary signal. 
Noise also includes unwanted information that must be filtered out. The more 
information we produce, the more noise we produce, too. Conversely, as noise 
increases (including unwanted information), the filtering must increase, as the 
information signal must gain in strength. Both activities require substantial 
resources. Thus, the creation of noise by information affects information, and this 
is a serious matter. 

Shannon and Weaver (1949), pioneers of information theory, identified noise 
in communication with entropy. This obscure mathematical point gave noise a 
central role in social analysis. Entropy is the essence of the second law of 
thermodynamics. It is deeply pessimistic in that it sees the world eventually and 
irreversibly losing its energy potential and becoming, in Boulding s words, a 
“lukewarm pea soup.” Accordingly, the world would eventually not go out with a 
bang but with a whimper. 

Entropy uses up the potential of energy and of life. But life’s ability to create 
information and organise itself can oppose entropy. Thus, information is perhaps 
the one major counter-force to entropy. Society’s inability to manage its 
information resources therefore means that noise increases more rapidly than 



38 



"society's inability to manage its 
information resources therefore means that noise 
increases more rapidly than information." 



•• ECC .• 



Syslffnk fiotrtsMds in the IfiWmolion Sociit]f 
Eli M. Noam 



information, and this has many implications on the individual, organisational, and 
social levels. 

To deal with the problem of inadequate processing and the noise it generates, 
society has a variety of responses and coping strategies. They will now be discussed. 

Response 1: Increased Heat 

More information, more noise, and more clutter lead to a need to amplify 
and/or repeat a signal message. This can be seen best in advertising. Between 1930 
and 1990, advertising expenditures per capita in the U.S. increased by over 
2,200%, whereas the population increase was 200%. A quarter century ago, the 
average American was targeted by at least 560 daily advertising messages, of which 
only 76 were noticed. In 1991, the average American received 3,000 daily 
marketing messages. Viewer retention (part of processing) of television commer- 
cials dropped. In 1986, 64% of those surveyed could still name a TV commercial 
they had seen in the previous four weeks. But six years later, in 1990, only 48% 
could do so. This lessened attention leads to an increase in the “heat” of messages, 
whether in advertising, politics, or the general culture. It also affects media 
programmes, which also must be more intense. It favours visual themes, simple 
stories, and pseudo-facts. In politics, it has led to the emergence of the 
pseudo-event and the 15-second sound bite. 

Increasing heat and frequency, however, do not solve the problem of the 
processing bottleneck, because almost everyone resorts to the same methods of 
amplification. Thus, like the onlookers to a parade that are all standing on their 
toes, we end up less comfortable, with more noise, and with even less processing 
relative to information. 

Response 2: Closing and Specialisation 

One way people protect their processing channel is to shield it from too much 
information by selective attention, stereotype, even prejudice. People tend to 
notice communications favourable to their dispositions. Voters do not want 
information but confirmation. Leon Festinger introduced the concept of cogni- 
tive dissonance as coping mechanism. John Locke in his Essay Concerning 
Human Understanding wrote: “Where in the mind does these three things: first, 
it chooses a certain number (of specific ideas); secondly, it gives them connexion, 
and makes them into one idea; thirdly, it ties them together by a name.” This is 
done “for the convenience of communication.” 

Another form of closing is specialisation. As the volume of information rises 
relative to any individual’s ability to handle it, specialisation takes place. There is 
nothing new about this. Tasks were divided from the earliest days. Long before 
Adam Smith wrote his famous description of the needle factory, the sons of the 



Strategies to cope with informa- 
tion problems like its processing 
and noise 



Growing output, but less retention 



39 



ECC 



Systemk Botrififncks in fhe Informotiofi Sixishf 

Eli M. Noam 



Selective attention: shielding 
through specialisation, stereo- 
types or prejudices 



Organisations grow in order to 
process more information 



Organisational complexity raises 
informational complexity 



original Adam specialised already, the Bible tells us. As the body of knowledge 
grew, the evolution of fields of expertise continued into ever-narrower slices. 
German has an apt term, the “Fachidiot” (Speciality-moron). 

Nietzsche mocked it a century ago. “A scientist was examining the leeches in a 
marsh when Zarathustra, the prophet approached him and asked if he was a 
specialist in the ways of the leech.. O, Zarathustra,... that would be something 
immense; how could I presume to do so!... That, however, of which I am master 
and knower, is the brain of the leech; that is my world!... For the sake of this did I 
cast everything else aside, for the sake of this did everything else become 
indifferent to me...” 

The result: the inexorable specialisation of scholars means that universities 
cannot maintain a coverage of all subject areas in the face of the expanding 
universe of knowledge, unless their research staff grows more or less at the same 
rate as scholarly output, about 4-8 percent a year. This is not sustainable 
economically. The result is that universities do not cover anymore the range of 
scholarship. They might still have most academic disciplines represented - 
whatever that means - but only a limited set of the numerous subspecialities. 
Many specialised scholars find fewer similarly specialised colleagues on their own 
campus for purposes of complementarity of work. In other words, the 
collaborative advantages of physical proximity in universities decline. Instead, 
scholarly interaction increasingly takes place with similarly interested but distant 
specialists of similar specialisms, i.e., in the professional rather than the physical 
realm. 

Response 3: Reorganisation 

An organisation transforms inputs - resources, messages - into outputs. 
Groups, like individuals, have channel processing capacity and points of overload. 
Laboratory studies also show that decision makers seek more information than 
they can effectively use. Management studies show that the typical executive can 
receive and absorb only 1/100 to 1/1000 of the available information that is 
relevant to his or her decisions. Additional information may actually reduce 
performance because it increases the decision maker s confidence. 

There were hardly any middle managers in the United States before the mid- 
nineteenth century. But by 1940, managers and clerks accounted for almost 
17 percent of the U.S. work force. Their number grew by 45% alone between 
1900 and 1910, far outpacing the growth in the general work force. In the same 
decade alone, the number of stenographers, typists, and secretaries, the staff 
workers for middle management, increased by 189 percent. 

One way for organisations to increase information processing capacity is 
simply to grow. As information increases, control mechanisms require still more 
information, leading to excess load and even potentially to general breakdown. An 



40 



ECC .• 



Systtmk Botliiflicks in ifn ttrformtftkNi Socitty 

Eli M. Noam 

organisation’s response to informational complexity is usually to increase 
organisational complexity-management layers, procedures, and controls. The result 
are organisational pathologies, such as tensions between the field and the centre; 
depersonalised leadership; fragmented understanding; take-over of rigid 
procedures. 

Just as individuals, a group also has upper limits for information processing. 

The larger the group, the more specialisation and task-sharing can be accom- 
plished, but the greater internal information flows become. For Peter Drucker, the 
First Law of information theory is that: “every relay doubles the noise and cuts the 
message in half.” 

One alleged new tool to enhance productivity in organising is “groupware,” 
such as Lotus Notes, which permits many people to communicate among 
themselves, both within and among companies. One study (J.G. Miller, 1960) 
found that teams of four participants had actually a lower channel capacity than 
single individuals at the same task. In these experiments four people were required 
to cooperate in coordinating information that appeared on a screen. The 
performance of two teams levelled off at about three bits of input per second, 
showing the point at which overload occurred. 

Response 4: Automatisation 



Information screening is the key technological challenge for the information 
sector. The super pipe requires the super screen. But as everyone who has used a 
data base can tell, the default part of any existing search system is how to suppress 
repetitive or unimportant information. That is, one needs a screening by quality. 
Expert systems and artificial intelligence applications will be useful here, but the 
technology is not even close at hand, if it can ever be achieved. 

Some such systems are “intelligent agents,” autonomous and adaptive com- 
puter programmes within software environments such as operating systems, data- 
bases or computer networks. Typical tasks performed by intelligent agents could 
include filtering electronic mail, scheduling appointments, locating information, 
alerting to investment opportunities and making travel arrangements. A learning 
agent acquires its competence by continuously watching the user’s performance 
and examples, by direct and indirect user feedback, and by asking for advice from 
other agents that assist other users with the same task. 

But all agent technology is rudimentary. The so-called intelligent agents are 
mainly mail filters. Technology can do only the most formalistic information 
selection. Humans can infer concepts from the words of a document. Computers 
are bad at that task. They have great difficulties determining what is important. 
Contextual analysis will have to advance to the point that machines can compre- 
hend the context of information and its meaning. Technological screening is, at 
present, quite high in its ratio of hype to reality. 



Automatised quality screening by 
intelligent agents is still rudimen- 
tary 



41 



ECC .• 



Systifnk lottiofMcki in the Inbrniolion Society 
Eli M. Noam 



Growing channel capacities vs. 
multi-channelling 



Multimedia transfers more infor- 
mation at once 



"what is most likely to happen is a shift to 
a multimedia form of communications with more 

ff 

visual and symbolic information. 



Response 5: Multitracking 

With rising information inflows, two coping strategies exist to increase 
processing rates: either raise the channel capacity by technology and organisation, 
or use channels in a parallel fashion. Electronic information systems can increase 
channel capacity, especially in transmission. But biological and social systems of 
humans cannot increase their channel flow equally dramatically. This suggests the 
multi-channelling of information. Media have different rates of display and 
absorption, for different types of information and different senses. One strategy 
of information processing therefore is to affect the way information gets 
presented. Eyes can get visual information at a broadband megabit rate. In fact, if 
the TV action is too slow, one gets bored. On the other hand, written information 
gets absorbed at the much slower rate of about 300 words/min., or 200 bits per 
second. Ears are even slower at about 200 words/min. or about 150 bits per 
second. And the tactile sense can handle up to perhaps 20 words/min., or about 
15 bps, using Braille. 

What is most likely to happen is a shift to a multimedia form of communica- 
tions with more visual and symbolic information, each carrying the type of 
information that can get processed most effectively on that particular channel. 

Visuals are good for conveying emotions. Print is better for abstract facts. This 
means the simultaneous attention to several information streams. Multimedia 
thus moulds several inflows, such as vision, hearing, and smell. Children already 
engage in informational multitasking. Television advertisements are a simple 
example for multiple information streams. They pack a lot into 30 seconds of 
picture, voice, music, and written language, all superimposed on each other and 
very tightly edited. Another example are sales presentations with their increasingly 
elaborate audiovisual aids. 

This multi-channel communication will lead to new forms of communica- 
tions language. Many more symbols will be used, because this can speed up the 
processing, and combines abstraction of written language with the speed of visual 
message. Even the sense of smell can, in theory, be used as a channel. Artificial 
smells are becoming production items. There are now “corporate identity” smells 
offered, and no doubt smells can be reproduced over distance. Touch and feel 
communication are also in development, first for sex applications. 

“Virtual reality” technology is today’s most sophisticated multitracking 
medium, filling up much of the user’s sensory capacity by creating a simulation 
that permits the user to “enter” three-dimensional space and interact in it. 

Will video push print out to a secondary role? Not really. Print works well for 
abstractions, whereas for images, video is superior. According to Nobel laureate 
Herbert Simon, the “least cost-efficient thing you can do” is to read daily news- 
papers. He recommends instead reading The World Almanac once a year. Thus, 



42 



ECC 



Syslmc lotll«nicks in thi InforriKiHon Sooify 

Eli M. Noam 

each information stream and presentation has some advantages. For me, the 
information medium of the future is the comic strip. Or rather, the “hyper” comic 
strip: panels of text with still pictures, some of them moving like film when you 
touch the screen. There will be sound, and even smell. The text will go into deeper 
details and connect with other text, like hypertext. One can skim this hyper comic 
strip or navigate in it. This will be on flat and light display panels one holds like a 
book, and one could write notes on it, store it, and send it to other locations. 



Response 6: Using Economics as a Screen 

There are other important approaches to information expansion beyond 
technology and reorganisation. One of them is economics. To an economist, the 
main problem is the limited presence of economic mechanisms in allocating 
information processing capacity. If our individual and organisational attention is 
a limited resource, why should it not be allocated as other scarce commodities are? 
At least that is the question. 

For example, we are being inundated by junk e-mail, each piece imposing 
some time cost on us, yet outside of a price mechanism. Why is our time a free 
good for anyone who wants to access our mailbox or telephone receiver? Let them 
pay for access. Prices are an excellent form of information about information. 
They provide relative values on time and information. In the upper reaches of 
power and prestige, access was always paid for indirectly. In advertising, marketers 
increasingly pay consumers rewards for attention. These payments can also be 
indirect, through a higher price for watching a programme without further adver- 
tising interruptions. 

When it comes to telephone calls, people should be able to select among 
incoming calls electronically only those calls they want, and to assess an access 
charge for those commercial telemarketing calls they don’t normally want to 
accept. Such a service might be described as Personal-900 Service, analogous to 
900-service in which the caller pays a fee to the called party. 

Individual customers could set different price schedules for themselves based 
on their privacy value, and even the time of day. They would establish a “personal 
access charge” account with their phone, or a credit card company. The billing 
service provider would credit and debit the accounts in question. In such a way, 
markets in information access will develop. 

Consumers will adjust the payment they demand in response to the number 
of telemarketer calls competing for their limited attention span. If a consumer 
charges more than telemarketers are willing to pay, they can either lower access or 
will not be called anymore. Because access is of value, exchange transactions 
would create rational markets instead of the present disruptive calls followed by 
hang-ups. 



Allocating information-processing 
capacities by price 



Markets for information access 



43 



■ ECC .• 



Syslimk BotrieraKis in ifw infonraljon SocMl)f 
Ell M. Noam 

A similar principle could be applied to an E-mail, voice-mail, or fax system, 
with the sender assessing the content’s value by attaching “urgent,” “standard” or 
“junk” levels of “electronic postage” on an outgoing message. The postage would 
be charged against the sender’s budget and credited by the recipient. This will cut 
excessive group lists and junk mail. These are a few suggestions for the general ap- 
proach. There is no claim that a market mechanism will resolve all problems of 
the misadjustment in information processing. However, it is an approach that 
needs to be explored much more than in the past. 

Conclusion 



Information technologies will 
have similar Impacts on society to 
the automobile 



A need for economic strategies to 
(pre-)select informational over- 
loads 



We may be talking about emerging information technology as if it is just about 
getting entertainment and study help into the home, and stock market data into 
the office. But it is naive to think that it will not affect us much more deeply. When 
the automobile was introduced, it was thought of a horseless carriage. But it did 
not stop there. Now, our cities, family structures, work, and neighbours are 
changed. The revolution in information transport will have a similar impact that 
the earlier revolution in physical transport had. 

Information technology and its present advanced expression, multimedia 
technology, will not rectify the imbalance between information production and 
distribution, on the one hand, and processing on the other. It will not solve the 
problem of limited processing and of noisy channels. 

So far we have focused on organisational, political, and technological respon- 
ses to the imbalance of information production and distribution to processing. 
None of these approaches has worked particularly well. Perhaps, therefore, it is 
necessary to take an entirely different approach, that of economics, a discipline at 
whose core lies the question of optimal allocation of scarce resources. Economics 
will not be the full solution, but we should think much more about economic 
approaches to information problems. 

As we move from the traditional situation - information scarcity - to a new 
and unfamiliar era of information abundance, we must be willing to consider new 
approaches to information. Instead of focusing on creation and on flows, we need 
to give priority to the question of screening and processing. This is the next stage 
of opportunity and challenge for technologists, entrepreneurs, administrators, 
and for society as a whole. 



44 



ECC 



Klaus GoIdKammer/ Ulrich Thomas Lange 



The Internet - 

On the Verge of a Modem Society? 



Klaus Goldhammer 

Coordinating author for the European Communi- 
cation Council (1996/97). 

Background as a media journalist for several 
German newspapers and magazines. Academic 
training in economics and media studies at univer- 
sities in Berlin, Landon and Barcelona (M.A. 1 995, 
Freie Universitat Berlin). Research and publications 
on radio programming and economics, e.g. Devel- 
opment and Perspectives of the Regional Radio 
Advertising Market (Berlin 1997). 



“\Liny c(»nccpticins about tho potential of the Internet are fre- 
quently diseussed while the problems are underestimated !’he 

Internet ... should find the right balance of international, regional 
and local nelwcirk performance. ... I he future of the Internet lies in 
its disiip pea ranee." 




Content Privatisation - The Background of Media Evolution 46 

The Interconnected Society is Yet to Come 46 

Hurdles to the Internet 50 

1 . Hurdle: Contents 50 

2. Hurdle: Bandwidth / Bottlenecks 51 

3. Hurdle: Pricing /Tariffs 51 

4. Hurdle: Interfaces /Technology 52 

5. Hurdle: Intellectual Property /Copyrights 53 

6. Hurdle: Financing Systems /Interactive Advertising 53 

The Internet - A Necessary Intermediary, Close to Implosion 54 

Will the Internet Disappear? 56 

Application Cultures of the Internet 57 

Lost in Space 59 

Internet Economics - E-cash and the Denationalisation of Currencies 61 
Micropayments, Downsizing Transactions 64 

"A few Profile Bits" - The Future of (Interactive) Marketing 65 




Ulrich Thomas Longe 

Coordinating author for the European Communi- 
catian Council (1 996/97). Founder and director of 
The Institute of Media Architecture, Berlin. 

Academic training in social sciences, communication 
sciences, journalism and pedagogy at universities in 
Dusseldorf, Essen, Bochum ond Athens, Ohio; (PhD 
in communication science at Freie Universitat Berlin, 
1987). Numerous publications on personal techno- 
logy, e.g. on the use of the telephone in the sociol 
context of everyday life. Research and consulting on 
media and technology issues for public and corporate 
clients in Germany and abroad. 



45 



ECC .• 



Th* (tilirnfl - On Tlw Virji of o Wod#m Sodtty? 

K. Goldhammer/U I Lange 



/ fji' oniy thin^ tluU t hccr^ nu up is thi liiU ’^th t V/y spirt ^ uri //n rrrf 
1; of I'ltizciis ri’rrii'iv ilu'irt from iluri Sr / i/im / /mi'i- :tj r.-/y }ij ihi'iiuru 



iua t ion of foii nutiists 



G&rrnon Feden]l President Romon Herzog, (ktober !99b 



Content Privatisation - The Background of Media Evolution 



The Internet thrives on its huge 
variety of privately produced con- 
tent 



1 Dunkley, Christopher (1996) The doit-yourself 
revolution. Financial Times, December 1 1 
1996, p. 1 1. Another threat in this respect is 
the history of CB radio. Starting in the early 
sixties as a cheap radio communication system 
for everyone, soon the channels of the citizens 
band radio were filled with people exchanging 
banalities. Today many of the Internet dis- 
cussions and forums could be compared to this 
development (Stoll 1995, p. 112-11 5). 

2 A term coined by Tony Rutkowski, executive 
director of the Internet Society (The Economist 
1995). 

3 Basicolly everyone with some computer skills 
con run and maintain a homepage on the 
Internet. No matter if it's the federal president 
or John Smith, no matter if it's a company with 
200,000 employees or just two friends. All use 
the same access procedures and protocols, all 
have similar opportunities to present their data, 
the Internet even makes them look the same. 
Which is a problem for some companies, if they 
want to "look big" on their Website (The Econ- 
omist 1995). 

4 It might appear strange that Europeans devel- 
oped one of the most important Internet stan- 
dards, although the Internet was and still mostly 
is dominated by the U.S.. But keeping in mind 
that ifie researchers at the CERN physics labora- 
tory in Geneva were working jointly and inter- 
nationally, the urge to have a feasible on-line 
tool for world-wide cooperation at their finger- 
tips appears even greater than in the U.S. alone. 



Market research and marketing, the predominant rulers of today’s media pro- 
ductions not only turned recipients into target groups and programming into a 
science of audience or listener flows, but gave new power to the consumer. TV and 
radio were among the first in an ongoing and sweeping change in the power struc- 
ture of demand and supply in the media field. Our hypothesis is that the media 
themselves are undergoing a process of “privatisation” in terms of their content 
production. From TV talk shows and “video diaries” to call-in talk radio or even 
on-line chat groups: the professional use (and sometimes exploitation) of content 
provided by private people not only led to a wider appeal of distributed content 
in terms of a broader scope of topics, but also to a more banal range of subjects. 
Although generally appealing to recipients and relatively low in production costs, 
the distracting and quite often trivial media clutter increased. ^ 

The Internet appears in this respect as the next step. With its bottom-up 
information infrastructure, ^ it seems more chaotic and less controllable, decen- 
tralised and unregulated. Thus, it offers more and new options for participation, 
because overall content production still remains predominantly in the hands of 
the individual. 3 The diversity and equality, scatteredness - and quite often banality 
in terms of available content - used to be one of the main appeals of the Internet, 
both to senders and receivers. Thus, professional content providers should keep 
in mind that the so-called interactive media especially will have to comply more 
and more with the growing eagerness to participate, to choose and to use the kind 
of media content that each single consumer prefers: whatever they want, however 
they want it, wherever they want it. 

The Interconnected Society Is Yet to Come 

The general concepts and foundations of the Internet were laid out in 1969 by 
U.S. military and later on by U.S. research institutions (F&F: Table 8.1.3, p. 332f.). 
For more than 20 years, the Internet existed quietly, left to its own devices as a 
communication tool for innovators, computer wizards and academics. Its 
unplannedness and uncommerciality were characteristics of the Internet. 
Between 1992 and 1993, two European researchers developed the so-called World 
Wide Web,^ while a 25 year-old undergraduate student at the University of Illinois 
programmed a browser software that allowed a more intuitive usage of the Inter- 
net. “Almost anything that made a difference on the Internet was produced by 
people whom the corporate world might consider nobodies” (The Economist 
1995). Together, these developments by nobodies evolved as new standards, alter- 



4€ 



ECC 



Dm Ifilrtwl - On Hw Vh 91 of a Modofn Socioty? 

K. Gddhammer/U. T. Lange 



ing the virtuality of the Internet with in-built multimedia capabilities and chall- 
enging the high-flying plans of the media industry. Suddenly there was a new 
medium available, combining the powers of broadcasting and publishing with 
another added feature: interactivity - a dream that telephone and cable TV com- 
panies were working on as part of their “Information Superhighway” concepts. 
But instead of a number of mostly unsuccessful interactive TV trials, the Internet 
came up with solutions the media giants didn’t have: with its browser software, the 
World Wide Web had solved the principal handling of on-line information. 



Interactive TV trials of the media 
industry were ridiculed by the 
Internet 



While interactive TV trials mostly failed to offer interesting content, the non- 
proprietary standards of the Internet allowed anybody to put into the web what- 
ever he or she found worth putting in. Although mostly useless, the vast number 
of sites and the huge variety of different sources offered sufficient new content to 
keep people interested. Rather than developing infrastructures, interfaces, set-top 
boxes or specially designed remote controls, the Internet made use of existing 
technologies like the PC, the modem and the ordinary telephony networks. By 
simply utilising telco overcapacities the Internet bypassed the problems of data 
distribution via highly expensive fibre-networks for interactive television. 

With its - compared to interactive trials - huge number of already registered 
users,^ the Internet made full use of Metcalfe’s Law: the “value” of a network, 
understood by its utility to a population, is roughly proportional to the number 
of users squared. The more people went on-line, the more it became attractive to 
users as a whole. 



Internet makes full use of Metcalfe's 
Law 



Shortly after these new Internet standards had evolved, early adopters like 
trendsurfers and technophiles in the U.S. became aware of the World Wide Web 
as a fashionable gadget. As a third and fourth step, more and more “ordinary” 
people, the so-called early and late majority, is currently entering the on-line 
world in America. In Europe, this group might enter the Internet over the next 
years. But it’s noteworthy that the growth of the Internet in terms of users and 
hosts came out of its structural surplus values such as individual creativity, relative 
simplicity, huge variety and not through the joint marketing efforts of the media 
industry. 

Therefore, the Internet serves as a good example of how a medium thrives on 
its own advantages. While telecommunication companies lobbied and U.S. politi- 
cians promoted the concept of an “Information Superhighway”, the Internet had 
already paved a road that the industry was only constructing. These overlaps of 
one side promoting an idea that already existed on the other side, fuelled the gen- 
eral public breakthrough. Suddenly, politicians, journalists and managers alike in 
the U.S. and similarly but belatedly in Europe started to believe and to talk about 
new technologies emerging, offering tremendous opportunities. The Information 
Age was frequently heralded; either the enthusiasts proclaiming it had already ar- 
rived, or according to the more cautious it is due to come. The cautious are prob- 
ably right. Although there were 14 million Americans connected to the Internet 



5 By January 1989 the Internet had already 
grown into a network with 80,000 hosts world- 
wide. 



47 



•• ECC .* 



Thi IntofiKl - On fin Vwgi o-f o Mod«ni Society? 

K* Goldhammer/U.T. Lange 



Internet growth will slow down 



Europe is at least two to three 
years behind the U.S. Internet situ- 
ation 



Sources 

Table 1 : Morgan Stanley (1 996), p. 3-1 
Table 2: Internet Society; ITU: Datamonitor; Booz 
Allen & Hamilton (1996) 



Table 1: Growth of On-line Connectivity Is Slowing Down 
Estimated World-wide Number of Users in Millions 







HM 


mr 


mi 


im 


Ml 


Kwwm 




147 


IN 


703 


317 


m 




3S 


40 


•0 


130 


110 


m 




9 


n 


44 


It 


in 


157 


Oniw/HyfayitMfi 


1 


13 


It 


13 


17 


30 



in 1996, PC sales - as today's indicator for the possible number of Internet 
connections - are already slowing down (Table 1). However, the U.S. is getting 
closer to reaching a critical mass of people using the Internet, enforced by flat 
telephony rates and high powered backbones. The belief in what we call the 
“Internet Law” (that every year the number of people connected to the Net 
doubles as in 1994 and 1995) can be refuted by simple mathematics. Internet 
growth in terms of users will soon slow down, although there might be some 150 
million users by the year 2000. 

Europe is far behind American figures. Even in techno -friendly Finland, only 
11.2 percent of the population were connected to the Internet in mid- 1996, 
whereas in the European core countries only 0.4 to 2.5 percent of the population 

Table 2: Internet Penetration in Europe (6/1996) 







4S 





ECC 



can use on-line connections (Table 2/3). European surveys show, that only a small 
and mostly affluent group (in terms of education, disposable income and 
computer literacy) has joined the on-line community. As Europe is following the 
U.S. trail with a delay of at least two to three years, ^ the real Internet market in 
Europe is yet to come. And unless at least some of the many barriers to the 
Internet are lowered, a truly broad usage of the Internet by the general European 
public appears less likely. 

We are now going to discuss the hurdles to and problems of the Internet. 
Many conceptions about the potential of the Internet are frequently discussed, 
while the problems are underestimated (Stoll 1995; Lynch/Lundquist 1996, p. 
157-161). Most of these problems are interconnected and thus add up to a set of 
difficulties that may hinder the rise of a fascinating new medium. 



Table 3: Internet Penetration in Europe 



ctniry 


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NvUitfliNrait 

NMfiptrlOOO 


Ni^tr if HmI, cMMctaJ ta A* taliml 
i/im t/mi 6/)m 


mrni 


11.2 


149 


35,?02 


112,521 


301,337 


Norwiy 


7} 


111 


IB, 027 


50,549 


121,475 




U 


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42,251 


109, 0S7 


190,404 


SwHitrM 


U 


91 


rt/fl 


n/o 


105,667 


NtribwiMidi 




SI 


44,917 


136,503 


216,153 


UK 


IS 


31 


!17j7a 


346,611 


579,756 


ikmwKf 


2.1 


36 


120,034 


429.249 


603,790 


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LO 


20 


56.475 


112JB2 


194,131 


Spdi 


0.5 


i; 


ts,iss 


41,551 


05,691 


«•»» 


0.4 


12 


11,027 


50,549 


119,952 




n/o 


it/o 


7,544 


24,416 


44,350 


UMMirk 


n/u 


I^B 


1,703 


36,347 


00,102 


lf«M 




n/fl 


2,330 


9,541 


21,403 


fiftigd 


n/9 




3,302 


0,950 


15,776 


Grtvc* 


n/n 


1^0 


1,935 


6,224 


11,896 


Ti^EU 


n/a 


n/o 


416,631 


1,469,722 


2,492,131 



The Inrimtf - On The Verge of o Modem Sociely? 
K, Goldhammer/U.T. Lange 



Bottlenecks of the Internet are 
underestimated 



The percentage of population 
using the Internet differs signifi- 
cantly in Europe: While the Scan- 
dinavians - as in mobile tele- 
phony - are well ahead with up to 
11 percent of the population sur- 
fing the Internet, the core coun- 
tries UK, Germany, Spain and Italy 
are still at an early stage with less 
than 2.5 percent of the population 
being Internet users. 



6 Just look for example at the crucial question of 
connectivity. While Americans are already 
replacing T3-Lines with lines that offer even 
greater data-processing capacities, Europeans 
are still dreaming of getting a T3-Line. 



Sources 

Table 3: Internet Society; ITU: Datamonitor; Booz 
Allen & Hamilton (1996); European 
Commission (1996): EU Wise Report 
OGXIII,Moyl 996; RIPE/EITO (10/1 996) 



49 



ECC 



Hm Intfcmt - On Ifit Virgt of o Modtfn Sodoty? 

K. Goldhammer/U. T. Lange 

Hurdles to the Internet 



Print media might regain some of 
their advertising market shares 
lost against TV 



E-mail, not video-on-demand is the 
"killer-application" of the Internet 



7 The word itself appears badly chosen, as its 
basic meaning is contradictory to what it's 
supposed to express. 



The obstacles and potential or existing setbacks for the Internet are manifold. 
Most of them arise from a combination of its technological history, which once 
supported its fascinating rise, and today’s enormous number of users. Firstly, 
there are some grave bottleneck problems that appear today as a great turn down. 
Secondly, the question of which usages and applications will be feasible in the long 
run (as well as the models for refinancing Internet services) has not yet been 
answered. 

1. Hurdle: Contents 

Every medium is only as interesting to people as its convenience and its 
content. As the concept of the Internet offers quite sophisticated convenience 
transferring data to one’s desk, the question of contents remains mosdy unanswered. 
People can obtain relatively little, despite flashy homepages. Webcasting is still in 
its early stages. To become appealing to the general public, a wider variety of con- 
tents, especially for the non-English-speaking, is urgently needed. 

In the wake of electronic publishing as the next step for old media conquering 
new ground there will be an attempt to overtake and professionalise Internet 
content production, which from an economic perspective is a not yet fully tapped 
media field. As print media (compared to TV and radio) currently experience a 
technological advantage when applying their content productions to the Web, it 
is more likely that electronic publishing will be the first to enter the on-line media 
successfully, rather than electronic broadcasting (European Commission 1996). 
Thus it will be interesting to see whether print media will regain some of the 
advertising market shares they lost against television in the 1980s and 1990s. 

The lack of interesting content is the driving force for the industry to search 
for the so-called “killer-application”,^ the single application that offers enough 
added value to induce the broad usage of the data-highway. In fact, there is already 
a successful application for the Internet: E-mail. Since the early 1970s it always has 
been and - at least from today’s perspective - will be the most useful and attrac- 
tive application the Internet provides (Hafher/Lyon 1996, p. 187-218). Microsoft’s 
Bill Gates believes the application with the most potential for the Internet will be 
video-on-demand (Gates 1995, p. 68). This idea appears unlikely, as the transmis- 
sion times needed are ridiculously high (F&F: Table 8.2.4, p. 336). Besides the 
transmission time it is even safe to say that this application would lead more to an 
implosion of the net than enforce its broad usage: too many bits would override 
the umbilical data cord. The danger of a potential roadkill on the data- autobahn 
is apparent. New applications for new kinds of contents distributed over the Inter- 
net such as telephony, radio or even television lead to a data congestion, that 
could induce a breakdown of parts of the system if the worst comes to the worst, 
and at best lead to clogged bandwidths. 



50 



ECC .• 



2. Hurdle: Bandwidth / Bottlenecks 

Up to now, the slowness of data- distribution over the Internet is more than a 
setback: it can potentially hinder any mass appeal. Transmission rates of 15 bytes 
per second are not that unfamiliar to many - especially European - users and the 
WWW as an acronym for “World Wide Wait” is not only a bad joke but also a 
deeply frustrating experience. The slowest part rules the speed of the rest of any 
network and a lot of the providers save money by overloading their leased back- 
bones.^ Network owners also play an important role in this area, as the costs for 
leasing backbones are exorbitantly high. They provide more than a bad service, as 
they threaten the future acceptance of the entire Net in the long run. From today’s 
perspective, the broad appeal of the Internet will only come if bandwidth as a 
serious bottleneck problem is solved, be it through compression algorithms or 
bigger cable capacities, better transmission technologies^ or all three together. In 
a lot of European homes there are already copper-coax-cable connections to 
receive additional TV programmes. Without waiting for the glassfibre world, 
those systems could be used soon to improve the interactive services of the 
Internet. 

3. Hurdle: Pricing /Tariffs 

One of the main reasons for the impressive rise of the Internet was its virtual 
low costs, both for usage and infrastructure. But in fact, the Internet only appears 
to be cheap. Until now network infrastructures and services have been heavily 
subsidised by governments and businesses. Besides the hidden infrastructure 
costs, non-usage related fees worked as another price advantage for the rise of the 
Internet, especially in the U.S., where flat rates^ ^ are not only offered for telephony 
but currently also for network connections by providers such as AOL. Europeans 
always refer enviously to the United States as a model of flat rate telephony which 
worked as a necessary precondition for the success of the Internet. But the disad- 
vantages of flat rates can be studied in the U.S. already. Too many people spend 
too many hours clogging phonelines and the Internet alike. While the Americans 
are already discussing the re-introduction of usage-related fees, Europe appears 
to be in need of such tariff structures in order to fuel further progress. For most 
Europeans, using the Internet not only means paying the service provider a basic 
charge but also a fee related to the number of megabytes downloaded or the num- 
ber of hours on-line, on top of paying their telco for simply being connected to 
the provider. Thus, access, usage fees and the costs for local telephony in Europe 
very often exceed the 60 dollar level per month, although 20 to 30 dollars seems 
to be the maximum amount of money users intend to spend per month in the 
long run. In 1998, after the deregulation of the European telecommunication 
market, the Internet should get a new boost from price reductions and the reor- 
ganisation of telephone tariffs. 



Tbe ltrt«rn«l - On Tbi Vetgi of d Modofo Soraty? 

K. Goldhammer/U.T. Lange 



8 Considering the fact that some European 
Internet providers only maintain a single 
500kbit-line to the U.S. (for sometimes as 
many as a thousand users) gives an impression 
of what the term bottleneck means. 

9 Telcos ore working feverishly on technologies to 
solve the bandwidth problem. ISON appears 
already outdated and too slow. ADSL and cable 
transmissions seem to be the choice for the 
future. But costs will be hefty. 

10 One shouldn't forget that people who use the 
Internet quite often don't have to pay for their 
usage: students get free access via university 
computers, and business users don't have to 
pay for their usage anyway. 

1 1 Flat rote means unlimited local calls, included in 
the basic telephone charge. Although the U.S.- 
Baby Bells are already considering dropping 
their flat rates, hoping to make higher revenues 
and reducing the number of people on-line for 
too many hours. 



51 



•• ECC 



Thi Mtfrtfl - On Vbtjb of o Wod«iii Sodety? 

K. Goldhdmmer/ U.T. Lange 



Using the Internet has to be as 
easy as using a microwave 



4. Hurdle: Interfaces /Technology 

Until the early 1990s the Internet was purely ASCII text. No images, icons, 
pictures or anything else. Interfaces were similarly bad in design and handling. 
They didn t exist because it didn t appear necessary for the on-line crowd, who 
were used to their computers. Internet usage soared when browser software facili- 
tated usage and visual appearance improved significantly. But one still has to have 
a reasonable amount of computer skills in order to join the Internet. One has to 
know how to run a computer, how to connect a modem and how to install the 
necessary software successfully. And then it’s still not necessarily the case that the 
new Internet user is familiar with hypertext-structures, whether he or she will find 
the data wanted or even return to a page visited before or whether he or she can 
handle the gathered data (Table 5). “The computer’s universal ability to generate 
frustration” (Stoll 1995, p. 60) plus the difficulties of the Internet technology itself 
(including the questionable design of many user-interfaces) account for the exclu- 
sion of a huge amount of people: the non-technoliterate. Other complex tech- 
nologies are far less difficult to handle. No one has to have the skills of a mechanic 



Sources 

Table 4: http://www.cc.gotech.edu/gvu/user_ 
surveys/survey-04-1 996; Copyright 
1994, 1995, 1996: Georgia Tech 
Research Corporation 



Table 4: Problems Using the Web (1996): Multiple answers possible, shares weighted 
Users were asked which of the following items they encountered while using the Web: 

* coit: "It costs too much/' 

* find ifffo: "Not being able to find a page I know is out there." 

* lost in bttK: "Not being able to organise well the information and pages I gather." 

* return: "Not being able to find a page I once visited." 

* iptfd; "It takes too long to view/downlood pages." 

* viiiMili*: "Not being able to visualise where I've been and where I can go." 







M 


Ml 


NMi 


IBA 




If-lS 




m 


cwt 




UN 


m 


141 


340 


IS 


131 


m 


30 






m 


m 


1.47 


7,72 


14.41 


10.IS 


1.10 


5.H 


M Wt 




im 


un 


m 


1,3f2 


177 


441 


1,071 


144 






JI3I 


3171 


3tU 


31.51 


HOD 


3I0S 


3415 


2113 


Inf In kilt 


ass 


us 


144 


211 


12 


54 


140 


15 




slnrit%) 




3.51 


1.47 


m 


3,73 


415 


444 


IH 


•r|Mb* 




i,m 


1.434 


S4f 


im 


If 5 


471 


U4I 


143 






3J.S7 


34.72 


31,14 


3414 


33.05 


3410 


34 41 


2143 


ntiif 




tta 


s« 


170 


S17 


II 


201 


421 


If 






im 


tin 


15M 


11,11 


14.f2 


15.W 


IIJI 


12.13 






5,3SS 


3,3fl 


1,354 


3,S0f 


4ff 


M50 


3,t31 


400 






•OJO 


1131 


71.54 


7170 


RSI 


•0.71 


1133 


71.51 


liHWili 




735 


407 


215 


445 


If 


117 


172 


S7 




ikve (%) 


mu 


M5 


\m 


lO.Si 


Ilif 


I0.S3 


1032 


1131 



52 



ECC 



T)w Intvmtt - On Tb Vwgt of a Modem Society? 

K. Goldhammer/U t Lange 

just to drive a new car, no one has to know about the circuits and microproces- 
sors inside a TV set in order to watch. Thus, the need for easier Internet tech- 
nologies and more intuitive interfaces is evident. Inventions like WebTV, @home 
or the upcoming Network Computers (NCs) or Java Computers (JCs) could be 
successful in this respect. ^ 2 



5. Hurdle: Intellectual Property/ Copyrights 

One of the most appealing ideas of the Internet is the promise of easy access 
to information. All kinds of digitised data, software, pictures, books, music or 
films could be downloaded. Pupils and students especially could take advantage 
of “information at their fingertips.” But besides a very limited number of projects 
trying to make books or data-bases available over the Internet, the related soft- 
ware, publishing, music or film industries are more than reluctant to put any data 
into the networks. Why is this so? Simply, because copyright laws don’t apply to 
the Internet. Intellectual property rights, safeguarded by copyright laws and 
patents are the key technique to ensure that someone’s ideas and creative works 
are remunerated. In a digital network environment, distribution and copying of 
such data appears not only uncontrollable but also ceaseless, because there would 
be no loss in quality from reproducing the data. Unless entirely new copyrights 
relaws developed that deal sufficiently with intellectual property rights in a global 
network environment, unconditional access to all kinds of information via the 
Internet might remain a myth.^^ 

6. Hurdle: Financing Systems /Interactive Advertising 

The development of the Internet appears in some respect comparable to the 
evolution of old media like the radio. V^en radio broadcasts started in the U.S. 
in the early 1920s, they were mainly run by enthusiasts, shops and the radio 
manufacturers, who wanted to have content produced for their reception equip- 
ment. But nobody knew in the beginning how radio could be financed in the long 
run. Similarly to this uncertainty in the early days of broadcasting, the Internet 
is going through a time where many enthusiasts and some software manufactur- 
ers are engaged in the contents field, while traditional media are moving into the 
Internet more slowly. Just as in the old days of radio broadcasting, nobody knows 
exactly how Internet refinancing systems will be organised. Interactive advertising 
is still in its early stages, but it is already clear that on-line advertising will have to 
offer more choice for consumers, which messages they want to receive. This 
power-shift might change the style of marketing significantly. 

However, nobody knows yet what the system will look like in the end. The now 
popular banner ads can’t be the solution to the interests of the advertisers, as they 
are weak in their visual appearance and restricted in their ability to deliver 
intended messages. We are going to discuss the economic backgrounds, finan- 
cial thresholds, marketing opportunities and threats later on in more detail. 



12 In the Autumn of 1996 Sony and Philips pres- 
ented WebTV, a US$300 set-top box, working 
basically as a small computer with no hard disc, 
that brings the Internet onto a normal IV screen 
and allows a 30 Mbit connection over normal 
copper telephone lines. Other companies have 
already announced similar systems, ©home is a 
project in Northern Californio, that also provides 
Net access over TV cobles. (Hammond 1 996, p. 
116-117). See also: www.netscape.com/ 
comprod/tech_preview/index.html; inferno. 
Iucent.com; www.diba.com; kotranet. kotra.or.kr/ 
product/worldclass/Igs/; www.lge.co.kr 

1 3 For example the "Project Gutenberg", founded 
by Professor Michael Hart at the Illinois Bene- 
dictine College has digitised about 200 books. 
By the year 2001 about 10,000 books are 
planned to be available over the Internet (Stoll 
1 995, p. 1 75). Or see the "Virtual Institute of 
Information" provided by Columbia-University 
(http://www.ctr.columbia.edu/vii/). 

1 4 A UN conference in Geneva in November 1996 
came up with a list of suggestions regarding 
Internet copyright. By extending the Berne 
convention on international copyright laws, the 
UN conference suggested that the storage of 
Internet pages in the temporary cache of a PC is 
lawful. Any other copying or storing of copy- 
righted Internet pages as well as their distribu- 
tion should be prohibited. The regulations have 
to be confirmed by nationol governments. Initi- 
ative Media (eds.) (1997) Schutz von Urhe- 
berrechten im Internet, Mediagramm, Issue 
1/1997, p. 14. See also on recent European 
copyright regulations: Gaster, Jens (1997) The 
harmonisation of copyright and related rights - 
in this report. 

ISSmulyan, Susan (1994) Selling Radio. The 
Commercialization of American Broadcasting 
1920-1934. Washington, London. 

16 As software has already been developed to 
mute those kind of on-line ads, their time may 
already be over. 



53 



i* 



ECC 



Infimat - On !k V>f gg of a Modtm Sodtty? 

(ioldhainmer / U. T. Lange 



But to summarise our brief overview of Internet hurdles one can say that at 
the moment the Internet is in need of solutions in several important areas: con- 
tent, bandwidth, pricing, interface technologies, copyrights, refinancing systems 
and the related area of interactive advertising. Most of these questions (and there 
are others like child protection and privacy^ 0 are connected and unless most of 
them are solved, a significant growth of Internet usage and scope - beyond the 
relatively small number of the technoliterate - seems highly questionable. Espe- 
cially in Europe. 



1 7 But we don't consider them to be a problem for 
further growth of the Internet. Electronic 
activists in the U.S. in particular are arguing 
heavily to safeguard privacy. They fear that the 
automised combination of data, collected from 
different Internet sources, where a user left 
"digital footprints", could severely undermine 
the idea of personal freedom and be abused by 
governments and businesses alike. For a more 
detailed discussion of privacy issues in a 
network environment see Cavoukian/Tapscott 
1997; Ludlow 1996. The second related 
problem area is the question of child protection 
on the Internet, whether from obscene or porno- 
graphic or neonazi material, which otherwise is 
generally kept out of reach for children, but on 
ihe Internet can be accessed easily. 

18 Surveying The Competitive Internet Landscope 
And The Likely Position for Telcos, Internet 
Service Providers And Vendors In The Internet 
Value Chain, Speech by Mr. Kaj Juul-Pedersen at 
the Telecoms, The Internet II Conference in 
Geneva on 29th October, 1996. 

1 9 Siegele, Ludwig (1 996) Warten auf die Daten- 
finsternis. Die Zeit 27. Dezember 1 996. 



I me -iiitrt hy ymi to imagine o pieture of of o tele- 

eommtwHiitioii^ awipaiiy, iti hh offue, rM /mrri of his eipiipped ntfil/ every 
pt^>sible muhiineJui, f futility, eoiwet ted tf- the looit! ureo iieheork otui 

ivntteeteti W the -JiYfiT leorU by hiteniet. is hts tvvpmrrru f I be ifuol- 

ityotuieitptteity ef his hHatareo network thwn. internet ts his prmmry 

tvjl htreoiuhtetin^ bnsine^^. Hu! hts rrorrijfi/fffjfti irnffh sufferinti heaittse ever'. - 
boiiy else iirr / \.V ts nsmy; tt tor internet rmffie Hu! he is n moiieni exei utive, 
nevertheley^ he is snrfitty the rri-r. lie hns diseoeeretl ihut by ihidressmj^ptiye 
v.vriiheide he i 5 ri[JU’ nhie to ehtom irihinnntion thnt prertoush would ttike dny- 
to eome fit hts desk, lie bus ienrned to identdv pu^es more mtereitm^ thun others 
lie iiin jj.'ir u oreh etti^ine- to do hts job n little bit etteetnrly. Htit he iikJ 
eolleoyim''- ore extremely nnnoivd hy the of time, the endles-. hours spent ctFf 

downliHidm^ infornmtion thot muy linnet iifh ^ turn (till to he u.wle'^tir wtutiny for 
somethin}; to hoppen white wntehut}^ ytduxie: und sfurs eommy down to eurth or 
exploring hy different menus f/ir lyih tspuie. So u /ly is t! then thnt this exeeutive. 

ret ently uttrneted to this eyherworld nnd -o frnsimied, willsttH reiommend his 
itftnpnny to lend nn Internet ttututtivef^ Been use ns 1 stud: Imertiet is the most 
important development m teleeommuuuattons situs midule telephom 

Kaj Juul-Pedersen^® 

The Internet - A Necessary Intermediary, Close to Implosion 

The Internet creates demands which its technology may not yet serve. Never- 
theless the Internet is a necessary phase to go through in order to build up a more 
efficient communication network. Some Internet protagonists suggest that the 
most important contacts between people will be their international relations. But 
only a few users are really cosmopolitan people with lots of friends around the 
world. So in fact the vast majority of data used by the Internet community could 
be delivered in regional or even local networks. 

The Internet is close to an implosion. ^9 xj^e [x conceptualised now 
contributes to unnecessary traffic within the international telecommunication 
networks. This could go from bad to worse if users start to telephone, listen to the 



54 



•• ECC .• 



Tfw Intifnit - On Thi Varji of a Modifn Socioty? 

K. Goldhammer/U.T. Lange 



radio or even watch videos via the Internet. Furthermore a very important factor 
of environmental pollution in the Internet is the hyperdesign phenomena, jazzed- 
up homepages with lots of graphics and animations, which are very often unne- 
cessary to interpret the content searched. 

The technological bottlenecks of Internet 1 could be understood at its best by 
new strategies to build up a more efficient Internet II. As the Internet is too slow, 
the world of on-line services will be divided at least into two Internet worlds: “The 
first step in the project will be to establish high-bandwidth pathways .... This 
means building or leasing new fibre-optic lines and installing improved switching 
equipment. Internet II also will use new ‘protocols’, or standards, for sending data. 
The current Internet uses a system called ‘best effort’, which essentially means 
‘everyone for him- or herself’. Data is bundled into short packets, each of which 
travels separately through the system. Packets from a particular message don’t 
necessarily follow the same route and don’t necessarily arrive at the receiving 
computer all at the same time, but the receiving computer can assemble them into 
the original message. That’s fine for text and still pictures, but not so fine for voice 
and video. In a voice transmission, for example, you don’t want to go back and 
retransmit a lost packet and have it pop up later in a sentence; you’re better off 
ignoring it. Part of the problem is that the Internet is too democratic: it treats all 
packets equally where some, like those carrying voice or video, should have pri- 
ority. Internet II will have more than one class of service, and computers will 
select the one most appropriate for each type of communication. At least one class 
will offer ‘guaranteed bandwidth’. Once a connection is opened for, say, a video 
conference, users can count on a steady flow of information until they are 
finished.”20 

The Internet II which is intended to speed up traffic between research institu- 
tions will not solve the problems of the common user, and within the scheduled 
time frame the Internet II is built up (“Complete deployment of Internet II is 
expected to take three to five years.”2i) the implosion of the Internet I is likely to 
occur. The transportation crisis is already perceived by the telecommunication 
industry in the U.S. as well as in Europe: “Speaking about access and backbone 
capacity, let me turn to ... the traffic volume perspective. The traffic volume gener- 
ated worldwide by the telephony service is approximately 10 million Gbit per day 
and is closely linked to the number of subscribers. Compare that to the Internet 
type communication.... If the current increase of that type of traffic is to be 
believed also for the future, it will already next year surpass the volume of 
telephony traffic and continue to grow at a very fast rate. This is the reason why 
network operators, access providers and service providers are busy building traffic 
capacity to the delight of their suppliers. This is also the reason why there is a 
perception today that Internet is close to a breaking point. I am sure you all know 
about the spectacular blackouts which have happened to Internet service and 
access. And it is absolutely safe to predict that more will come. Or if not, then 
delays and waiting.”^^ 



The Internet is close to an im- 
plosion 



20 Steel, Bill (1996) Internet II: A boon for 
researchers, a proving ground for Internet I, 
Cornell Chronicle http;//www.news.cornell. 
edu/ Chronicles/ 1 0.31 .96/lnternet_ll.html 

21 (Steel 1996) 

22 Surveying The Competitive Internet Landscape 
And The Likely Position for Telcos, Internet 
Service Providers And Vendors In The Internet 
Value Chain, Speech by Mr. Kaj Juul-Pedersen at 
the Telecoms The Internet II Conference in 
Geneva on 29th October, 1996 "Our obser- 
vations suggest that there are three waves of 
traffic, each with its own distinct characteristics: 
The first wave, the E-mail type af best-effart 
service that dominated Internet until 1 993 puts 
relatively low requirements on response times 
and quality. And is today only a fraction of the 
telephony traffic. The second wave is the large 
file transfer or the web troffic generated by 
communication tools, web browsers etc. This 
troffic has a larger information content and 
higher requirements on bandwidth and quality. 
And already today thot traffic is equal to the totol 
telephony traffic. The third wave which is just to 
come is the video and real time traffic and the 
interactive duplex communication with very high 
requirements on response time and quality of 
service." 



55 



■ ECC .• 



fJ 



The future of the Internet lies in its disappearance. 



99 



The Ifilernef - fb Ik Vwgi of d Modem Sodefy? 

K. Goldhammer / U. T. Lange 

Who is the driving force behind Internet II and what will be invested to 
solve the traffic crisis? several dozen colleagues, universities and government 
agencies have joined to launch a new, improved, faster network. As of Oct. 8 
(1996), the consortium consisted of 37 schools, with a few more expected to 
join. Eventually the project is expected to involve 50 to 100 schools, along with 
a few government agencies and major computer and telecommunications 
companies. In return for access to the new network, all will contribute funds. 
Cornell, like the other universities participating, has pledged $25,000 toward the 
creation of the organisation that will administer the project and will contribute 
about $500,000 per year for the next three years to the actual development and 
maintenance of hardware and software. Some of this is expected to come from 
government grants; part of the $500 million in federal money recently pledged 
by President Bill Clinton for expansion of the Internet will go to the Internet II 

project.” 23 



The Internet - a necessary phase 
to go through 



23 Steel, Bill, Internet II: A boon for researchers, a 
proving ground for Internet I, Cornell Chronicle 
http://www.news.cornell.edu/Chronicles/ 
10.31.96/internetJl.html 

24 Surveying The Competitive Internet Landscape 
And The Likely Position for Telcos, Internet 
Service Providers And Vendors In The Internet 
Value Chain, Speech by Mr. Kaj Juul-Pedersen at 
the Telecoms The Internet II Conference in 
Geneva on 29th October, 1996. 



Will the Internet Disappear? 

The future of the Internet lies in its disappearance. We are actually moving 
towards an integrated universal Internet which does not seem to be tailored enough 
for the specific needs of different user- and target groups. The Internet of the 
future should find the right balance of international, regional and local network 
performance. Juul-Pedersen reduces the Internet to an “IP- Technology” and 
would like to take it as a mega attractor for plain old telephone services. He 
believes the strategy for telecom vendors meeting the Internet challenge consists 
of three steps: 

1. Bridge voice and data communication values to the Internet. This means 
developing the public and private telecommunication networks to become an 
excellent access path to Internet services. It includes developing access systems, 
voice gateways, service directories, and gateway functions for adapting the 
telecom network to the Internet world. 

2. Migrate voice and data communication values to the Internet. This step in- 
volves selected communication features, such as security, billing, statistics, and 
guaranteed quality of service. It means introducing these features as added 
value to the present Internet infrastructure and services. It means more con- 
nection-oriented transport and switching. It means building ATM networks 
with still better technology because many of today s ATM solutions do not 
provide service guarantees and have an inherently bad overload performance. 
Our research shows ways of improving this by 30%. 

3 . Extend functionality by providing new values based on Internet communica- 
tions concepts. This step involves an active development of new features for 
the Internet world in close collaboration with other vendors as well as selected 
operators.”24 



56 



ECC .• 



New features could enhance the variety of Internet usage and services offered 
by merging different technologies. The best example for the convergence of 
telephony and the Internet is Ericson s Phone Doubler. “The Phone Doubler is a 
... product designed to bridge the gap between telephony and Internet. In its first 
version it enables an end user connected via a normal analogue modem to receive 
ordinary telephone calls while connected to Internet over the telephone line. Our 
surfing end user receives an incoming telephone call. Normally the incoming call 
would meet a busy tone. In this case however it is forwarded to a voice gateway 
which converts the telephone call to voice over IP and forwards it to the PC over 
the busy line and presents the call to the end user in a fashion similar to Internet 
telephony. The Phone Doubler also supports outgoing calls.”25 

The risks of universal networks for everybody and everything are still high and 
if a real convergence is enabled it should take place in a realm of plenty and abun- 
dance to avoid critical traffic peaks which could harm the most necessary com- 
munication traffic. 

One of the central strengths of the Internet seems to be one of its major weak- 
nesses: the plurality of its interfaces. Whoever wants to place something into the 
Internet has to take into consideration the variety of browsers available. It seems 
as if the proprietary systems are rather outmoded, although the serious user is still 
waiting for a guaranteed quality which should include a well- structured and fore- 
seeable interface. 

Application Cultures of the Internet 

E-mail, as we have seen, seemed to be the “killer-application” for the Internet, 
although more and more people want to get “information” over the WWW. They 
want to be entertained by a coincidental surf or want to participate in electronic 
chats. And even e-mail is not just a short message exchange anymore which may 
have been sufficient for the early adopter. “We still want e-mail, but with a few 
twists. Now it must conform to certain standards so that it can inter-operate with 
our neighbours’ e-mail systems. And it must come with smart messaging and 
smart mailbox capabilities to help us filter and file our e-mail. ... With the advent 
of next generation operating systems based on object-oriented, distributed file- 
system technology, local messaging infrastructures will merge seamlessly with 
other groupware systems. In a sense, e-mail will become one of many front-end 
views into a vast enterprise database consisting of public-workgroup, and private 
information. Messages will exist as rich structured forms as well as textual objects. 
They will increasingly be exchanged between and among mail- enabled appli- 
cations and they will be sent to shared databases as well as to individual mail- 
boxes” (Blum/Litwack 1994, p. 8/13). 

The race for the best central interface or browser is still open and even the quality 
of the central tool, the PC, is not yet determined: “The PC is not a fixed product but 



Tlw Iflltriwt - On Thfl Virpi ol a Modttn SocMy? 

K. Goldhammer/U.T. Lange 



Universal networks for everybody 
and everything bear high risks 



The new Internet will deliver 
enhanced services 



25ebd. 



57 



ECC .• 



Hw Inleriwf - On 11w Verft of d Modem Soc«fy7 

K. Goldhammer/U.T. Lange 



The race for the best central inter- 
face is still open 



"The true power of the PC re- 
mains obscure" 



The window-in-window logic of 
the PC will conquer the TV world 



The interactive TV may come to 
late for the Netizens 



a continuum” (Gilder 1994, p. 209). The set-top-box and the PC will be 
“competitors” for the private entrance to the Internet. Although bandwidth and 
price seem to be (for the moment) more in favour for the Web-TV version, the 
computer is much better adapted to the world of the experienced user and already 
invades the new communication cultures of the very young. Andy Grove, according 
to Gilder, sees the PC as by far the more adaptable machine for the new communi- 
cation environments: “By contrast, the set-top box won’t have the volume, the 
installed base, the software, or the adaptability of the PC. By the time they get all the 
necessary functions into the set-top box at the right price point, the PC will be 
controlling the TV as a mere peripheral” (Gilder 1994, p. 209). But if the computer 
really is to enter the realm of entertainment on a scale that would be comparable to 
the time spent in front of TV, it should not be crippled by the smaller bandwidth of 
the connecting network and hampered by incomprehensible modem technology. 

“Until endowed with broadband connections, the computer is a cripple, de- 
voting huge portions of its processing power merely to compressing, decompres- 
sing, coding and decoding its data for the telephone system bottleneck. It is 
because of the bottleneck that the true power of the PC remains obscure to many 
observers. It is because of the bottleneck that the TV and consumer electronic 
industries can imagine themselves as significant rivals to the PC. But once pro- 
vided with broadband communications, the PC will come fully into its expo- 
nential harvest from microcosm to telecosm” (Gilder 1994, p. 210). 

Although Gilder underestimates the long-lasting effects of a traditional media 
setting like TV (the favourite place for the TV set is the favourite room) and 
doesn’t refer to the problem of the screen size (TV is still the “largest” screen in 
the private home and the larger the screen the more pleasure you’ll have watching 
audio-visual products) he could be right that the cultural technique “interacti- 
vity” will be learned much quicker and more effectively while using the PC. 

Whereas the World- Wide-Waiting-hurdle may be solved technologically and 
even faster and even more cheaply with TV-technology, the new social networks 
are already emerging today around the PC. The “typical options” for new “cultures 
of Internet” (Shields 1996) are offered “in the sort of a menu: games, special 
interest forums, registry, electronic mail and teleconference” (Argyle 1996). The 
interwoven technology opening several “windows” to the world at the same time 
is the personal computer and not TV. The window-in-window logic may conquer 
the TV world sooner or later as well, but the zapping and channel hopping couch- 
potato is not in every respect identical with the ambitious “communication 
specialist” who is urgently looking for dedicated communication experiences 
(Lange). So the question of how to retrieve data and to construct a personal infor- 
mation basis maybe secondary for a new generation intending to spin their social 
networks around computer and Internet technologies. The interactive TV may 
come “too late” for those people who already use their computer knowledge to 
participate in the spin-off in virtual space. 



58 



ECC .• 



Th« Intffiwt - On Th« Vvr^i of a MoAm Sockty? 
K. Goldhammer/U-T. Lange 

The immediate switching between communication modes (although re- 
maining in the same technological channel) and the deliberate mixing, juxta- 
posing and splitting of the public and the private are the specific thrills of the 
informal cultures within the Internet. 

“In electronic mail and postings to Usenet groups and special interest forums, 
users do not interact with each other; instead they are responding to ideas left by 
others on specific topics, or in forums with a pre-determined subject .... Private 
correspondence with specific individuals are held via electronic mail. These are 
responses which only the addressee will see. In forums, anyone can answer, and 
all will see the response. Here there are no action commands to express the state 
of the writer at the time of the post. Instead, other avenues have been utilised to 
express meaning at a deeper level” (Argyle 1996, p. 64). 



Lost in Space 

Many users get lost while surfing, and there should be some critical remarks 
allowed, if the Internet with its on-line databases is a real contribution to 
acquiring knowledge: “On-line databases reply readily ... direct answers, the kind 
that show up on multiple-choice exams. Ifs black-and-white view of the world, 
one well suited to a digital network. Alas our world has no such simplicity. The 
good questions have no easy answers; likely they have no answers at all. But ifs the 
quest that beckons so seductively! Search the Internet for the pathway to world 
peace and justice. Find a database telling how to settle the thousand-year-old 
cross-cultural hatreds in Serbo-Croatia. Create a spreadsheet that balances the 
federal budget” (Stoll 1995, p. 124). 

The Internet is a perfect tool to very quickly get at least some idea about a new 
topic of which the user doesn’t know anything at all or on the other hand a 
distracting detour to a precise problem of a specialist. So far, neither the journal 
nor the book must fear competition from serious knowledge acquisition in depth 
via the Internet. And the hyper-links of a CD-ROM are far more attractive than 
the slow speed browse in the Internet book. Even TV has its advantages in 
comparison to the Internet. The new interactive technology Internet has to prove 
that it is really stronger in providing better information than the older technology. 
“Wide bandwidth is one of the holy grails of the on-line community. How about 
a three-million-bit-per-second communication channel, connecting your desk- 
top to the latest news? Hey, it’s already here, in the guise of broadcast television. 
If you must keep abreast of the latest events at work, put television on your work 
desk. Tune it to the Cable News Network. A TV is cheaper than a modem, easier 
to operate, and you’ll get a wide bandwidth, channelled news, with an occasional 
commentary tossed in. Of course, ifs absurd to put a TV on your work desk. Yet the 
Internet, with its wide access to games, newsgroups, and chat lines, is considered 
desirable for the office. Go figure” (Stoll 1995, p. 100/101). 



"The good questions have no easy 
answer" 



Neither the journal nor the book 
must actually fear Internet com- 
petition 



59 



•• ECC .* 



”where are the public servers for the "average" citizen? 
.So the democratisation of content production is a fiction. 



The Inlernef - Cb Hw Vef|)i of d Modem Sodety? 

K. Goldhammer/U.T. Lange 



The level of "activity" of Internet 
users is overestimated 



The democratisation of content 
production is a fiction 



New social access through public 
support 



Most of the Internet users in relation to “content” are “passive” participants, 
with no direct access to an Internet- Server. The question of how to incorporate a 
private PC as an active building stone for the Internet has still to be solved. The 
hurdle of designing an html-page is lowered day by day, and suitable editors, 
which could even be included into the accustomed word processing environment, 
are now offered on the market. But where are the public servers for the “average” 
citizen? Some of the proprietary service providers offer some reservoirs for private 
messages to the outer world, but to start as a “content provider” on a small scale 
is rather expensive. So the democratisation of content production is a fiction, 
written by those early adopting spongers who had access via a public or private 
“sponsor”. “Only the geographic distribution of Internet emphasises the differ- 
ences between users who are typically students or researchers who access the 
Internet through the mainframe computers and computer communication links 
paid for and maintained by universities, government offices and companies. 
Typically, Internet has flourished because users could make personal use of com- 
puters and e-mail facilities which are paid for at a bulk rate rather than a charge- 
per-use basis” (Argyle/Shields 1996). 

Now as the second wave of usage is expanding in Europe, extending the 
Internet to people with lower income or lower education, politicians should take 
the opportunity to open access through public support. Instead they pretend to 
be members of the new Internet community by employing young assistants to 
design their homepages, which nobody really wants to hit. Each new user study 
tries to prove that the percentage of women using the Internet is growing, and take 
it as an indicator for the “civilisation” of the net, but it will require a strong effort 
to give less technology- oriented people, like the elderly, an equal opportunity in 
future. This does not necessarily mean that every citizen would like to have or 
“deserves” Internet access, but if citizens want to use it, the Internet as a new 
infrastructure should be affordable to them. 



SO 



ECC 



The Ififartwt - On The Verge of o Modem Society? 
K. Goldhammer/U.T. Lange 



‘Ut’uiM /»f. iTCi»/i that thciii^itifiitnyn of inomyiouplcti with low cost, hi^h 
spccti. \iloluti forever ^rowinsi. tntcractivc networks will Ictul to many nnv forms 
of i ionomy. If the use v! anonymous ilijiital cash atui eneryptctl eommumeation 
reaches critical mass on the Set. it has the potential to cripple ami ultimately tie 
stray the notion of hath heal ami national ttixation, it will tlismantle corporations 
ami It will fuel a caciiphony of black markets, yrey markets ami sub-fYonomic 

Roy Hammond (1996) 

\s every worU currency comes to tune an eifuivalent value m ihgttal 
f i. the natural temlemy is to /mn-i' toward ir ^^vriii currency. I he ideal 

form ofdij*ital will he a currency without ii itJiffi/ry. or of all countries, infi- 

mtely exchanyeahh without the expense or ineonvenienee of exchan^in^ amony 
local denomwatiorts. f ... f lhy_ital money may in fact he leadmy us iriviiy from the 
hankinj^ und monetary systems we are most familiar with today. 

Lynch/Lundquist(1996) 

Internet Economics - E-cash and the Denationalisation of 
Currencies 



Each day, the London based Euro-Bond market shifts about 1 trillion dollars 
around the globe via its computer networks. The “Society for World-wide Inter- 
bank Financial Telecommunication” (SWIFT) moves more money electronically 
each month than most countries have at their disposal as a years budget.26 Money 
and especially the trafficking of money is already digital, global, and in this respect 
mostly out of reach for government control. (Hammond 1996, p. 154-167) - The 
“denationalisation of money”, a concept promoted by economist Friedrich August 
von Hayek in theory, has already been put into practice - at least in the financial 
world. 

As a next step, the Internet could become the first fully private denationalised 
trading and exchange system, both for consumers and businesses. Like in the early 
ages, when bills were issued by private banks, the emerging digital banks of today 

- which are mostly joint ventures of credit card and computer companies (Table 5) 

- are already working on systems to issue their own electronic currencies:^^ Digital 
money would open opportunities for businesses, especially Internet businesses, 
around the globe as well as posing serious threats to the world economy: 

Methods of billing and payment could be facilitated and accelerated. E-Trade 
would be much cheaper and faster, especially for banks, as transaction costs are 
minimised while transaction speed would increase significantly (Table 6). Cash 
and cost control would be much more precise, as credits and debts could be ac- 
counted in real-time. The acceleration in transaction speed could itself force 
significant changes on businesses and consumers, as the delays of today’s banking 
system are often taken as an economic advantage by debtors. 

Although Internet-related revenues world- wide reached about 16 billion dollars 
in 1995 (Table 7), Internet commerce is ridiculously low in scope.28 The absence of 



In the financial world, money is 
already digital, global and mostly 
out of reach for governments 



26 Over 90% of all financial transactions worldwide 
are transmitted digitally. Less than 1 0 percent of 
the American Dollars exist as actual bills or 
coins, similarly there are only 223 billion 
German Marks physically existent but 4 trillion 
Marks are stored digitally (Freyermuth in BolF 
mann/Heibach 1996, p. 179-182). 

27 "Someday, digital cash will let us exchange 
goods via e-mail. Complete with encryption, 
authentication, and zero4nowledge proofs of 
identity, this will let us make on-time transac- 
tions that are as good os dollars. The system will 
know that we've been authorised to make the 
transactions, it'll confirm that the sellers are 
willing to sell goods, it'll assign special codes to 
prevent our accounts from being debited twice, 
and - bong - the transactions happen. All with 
total digital security. At least that's what I'm 
told" (Stoll 1995, p. 163). 

28 IBM estimates in a German press release, that 
Internet shopping worldwide in 1995 reached 
only 73 million US dollars. 



§1 



ECC .• 



Tin \f\twm\ - (b Hw V«ffi of d Mod«m Sodoty? 

K. Goldhammer/U.T. Lange 



E-Cash: Selling and buying digital 
is expected to grow over the next 
decade enormously. Different sys- 
tems with different features are 
awaiting the mass market, with 
security still the hottest topic. 



Table 5: Comparison of Features and Comparative Strengths of Various Digital Money 
Systems (1996) 




Tempting: Internet banking is by 
far cheaper for banks than any 
other transactional system. It Is 
strange, that only few on-line 
services are offered in Europe. 



Table 6: Cheaper Transactions on the Internet 
Costs for banks per transaction in US $ 




TiU pl i o— lowkhig : 0.54 

25 

AvtoMottd T«ltf ' 

10.27 

Coiivtfitioiid PC*l€Nkinf io.02 
IntffiMt-loNkiiia 

0.01 



IIM 



I UN 



29 Alltiough one has to keep in mind thot tfie ordi- 
nary mail-order customer is probably far away 
from shopping on the Internet (The Economist, 
1995; Stolll 995). 

Sources 

label 5: Lundquist/Lynch (1996): 

Digital Money; Freyermuth in Boll- 
mann/Heibach (eds) (1996) 

Table 6: Booz, Allen & Hamilton; Wirtschafts- 
Woche 48/96; IBM (1996) 



a suitable financial transaction tool has hindered any serious growth. It is claimed 
that E-cash could solve the security problems of credit card numbers transmitted 
over the Internet. E-cash could therefore become a feasible tool for on-line shopping. 
High-flying forecasts range from 920 million dollars (Baskerville Com.) to 5 bil- 
lion dollars (Morgan Stanley) coming solely out of Internet commerce by the year 
2000. In 1995, ordinary catalogue sales with 53 billion dollars world-wide and TV 
home shopping with 2.5 billion dollars could indicate the size of future Internet 
shopping markets.29 These precursor behaviours (including video rental, mail- 
order purchase, TV home-shopping or home delivery services) are much smaller 
in scope in Europe than in the U.S.. Internet commerce in Europe might therefore 
take off much later than in America (Lynch/Lundquist 1996, p. 124-127). 



62 




■■ ECC .• 



Tlw Inlirnit - On Tli« Vergi ol q Modim Sod«ly? 

K. Goldhammer/U, T. Lange 



But there are many open questions regarding E-cash. Besides the fraud 
problem, which digital banks promise relentlessly they have solved (and which we 
do not believe, as any financial security system is subject to criminal interests), 
trust and authentication of seller, buyer and the digital bank are core questions. 

As e. g. IBM E-cash would appear much more attractive as a stable and trust- 
worthy investment than the legal tenders of any third world country, money could 
become reprivatised. Thus, keeping in mind that the Internet is a genuinely global 
medium in scope, governments are due to lose control over electronic money 
flows. The perils of electronic commerce systems getting either out of control or 
under the control of a single private power are vast. The inherent dangers of 
digital money, or a privately issued digital tender not handled responsibly are 
obvious. If E-cash is ever successfully introduced, governments will probably be 
forced to take legislative action in order to tackle possible fraud and the potential 
threats to their own currencies. 



Currencies are quite often perceived as a symbol of national sovereignty. As the 
Euro, the common European currency to be adopted between the years 2000 and 

Table 7; Estimated Internet-related Revenues in 1995 and 2000 in millions US $ 







OrtwHi 


2900 


IlintI MtHIT 


OlTfei yimifin* 


1200 




14.000 




Dfltf NtMvefUsf 


1,100 




1,000 


hoMiMld rnmiti li ctnganiti H kiid Intomt 


iHttfwl urirk« prurtfiri 


400 




5,000 


hlirrjl itndii pimdiri 


lalmt SwRifr EfiSpHrt mi Mh 
wqr« 


200 




tooo 


Frndk, nlid prinli nrinrling. ImHdW guin# 






*m% 


4%000 




K, nd SwikMd<rt»ri 


mm 


+ 400% 


40,000 


PC Old w w cHignti 


TikiMiiMikrHoii md 


m 




2000 


bitaiHl wiiwi 




m 


*m% 


1000 


IfKriiBMld rt+tiMs It EtRpflm It kaOd Ifllmiii 


S«4lw«rt lad Wrvkti 


w 




%m 




Stilwflr* 


m 


+ 417% 


1501 


E+ad, TCP/IP tppknian. btinan, tuOnin Itth 


Evtfrpriit gad fltlwwliiaf Saftmi 


TOO 


+ 1000% 


im 


bUtfprWdddm/Mrvtr uftaatt dn rdiitd It Mtml 


liUnM/OgiiM SarvkH^ Caciabiif 
md Dryitgffii 


IDO 


+ 400% 


400 


StninsndttitMktaf 


CgafnI nd Anfifailia 


im 


+flf% 


urn 




OlfniiDliia/ AggrtpatiM 




+ «0% 


4,000 


OiiM nvlti prtvitniiid wrch ai|iiH 


kflTMliM 


\m 


+sn% 


S.OOO 


Incmwid rtvmti pty'UrdoK nd odwimg 


Mkiliati/Sitifc mi hM- 
MfiMi/liIttacriva 


so 


+ 2000% 


1.000 


JAnanvanw J k^bnnl 

ipnm ■■ munmi hwiwi| mi mmii 


CasBifta nd Wnailim Pramii^ 


200 


+ 2500% 


1000 


liif nid rwnn bmM h mmirni tmmdm 


ftid rtf mil 


i5,m 


«4f7% 


T%m 




itftni irnffd kg IW laTawt 


i.m 


♦ 72t% 


UM 


iiid Of 10 bAvirvdw*, SifMrt nd 5«^ 

Hggrtfato 



Electronic commerce and elec- 
tronic publishers could expect the 
highest relative growths in Inter- 
net-related revenues although 
they remain small In comparison 
to infrastructural revenues. 



Sources 

Table 7; Morgan Stanley (1996); The Internet 
Report, p. 1-12, ECC calculations 



S3 



ECC .• 



IIm k\tm\ - On Dm Veryt of d Modem Sockry? 
K. Goldhammer/U.T. Lange 

E-cash and monetary policy 



A new concept in trade: Micro- 
payments 



Microtransactions have become 
a whole new category of financial 
transactions, especially on the 
Internet, by using divisible quan- 
tities of digital money for any 
service offered. 



30 Already book sales have collapsed in competi- 
tion with CD-ROM, and probably on-line will be 
the next challenge (The Economist 1995). 

Sources 

Table 8: Lynch/Lundquist(1996) 



2002 demonstrates, many governments of EU member states have difficulties in 
explaining to their electorate why the Euro should replace the old national 
currency in the long run. But with digital money emerging, these problems appear 
obsolete and even irrelevant, as E-cash - with its potential to bypass the transac- 
tion costs of foreign-exchange markets (Lynch/Lundquist 1996, p. 121) - would 
not replace any old currency but introduce a new global standard as a overarch- 
ing monetary system probably before the year 2000. 

Micropayments, Downsizing Transactions 

The second emerging economic idea is the concept of downsizing Internet 
commerce as micropayments. They have become a whole new category of finan- 
cial transactions by using divisible quantities of digital money for any trans- 
action (Table 8). Similar to the telephone tariff structures, this concept could 
become the most promising source for Internet revenues, by breaking down 
today s necessary high payments for many services or goods into infinitesimally 
tiny sums that only hurt when the monthly bill arrives. Due to the combination 
of very low delivery and transaction costs for commerce on the Internet and the 
exclusion of middlemen, payments can be very small, but they would still allow 
the provider to generate sufficient profits (Hammond 1996, p. 149-150). Thus 
the Encyclopaedia Britannica wouldn’t charge a large sum for a collection of 
books or a CD-ROM^^ that get dusty on the shelf, but perhaps only less than a 
pound for a single topic that is retrieved from their Internet homepage. Thus not 
only databases and libraries could suddenly turn into goldmines, with their reve- 
nues potentially rising high if copyrights are cleared, but also the threshold of 
buying high-priced goods could lower, as the price for a single piece of 
information or service for the customer is small, while the overall revenues for 
the supplier would still be reasonable. 

Table 8: Downsizing Financial Transactions: Micropayments 



Ptynwrt 


tfflatii ■ iwiiiwi 


biiMw- Pttiw 


Hnm-fmm 


Lirft 


Pbim 


Awhw 


ColigiluitMn 




Nrts 


IVi 


ItflMavfft 


SmI 




ta*. 


(hsfi/|Vi9i i4k) 


mo* 




It 





The question now is, how these products and services are sold over the 
Internet. Interactive marketing is going to change the nature of tomorrow’s adver- 
tising rapidly, as new tools and new marketing concepts emerge. 



64 




•• ECC .• 



\\v'H itsk ft) ^ timi we ll Hi<k v mr f<> i 'k/ mii/Zf^ihY 

(I month, iifid if iirt' uv7/ nphuitf a few pfv fiL' hit^ nhom how you re 

u 5 N/y' thi iipphoitmi^' and whit: your hardwtire i5= . Ami ^ the reiitnomlnp. itivj 
on prodth'ttvav - -ftworc. i.f o fot more nitinutie irm/ 

Bill (kTe^, Mkro^oft Corp. or Inlefne! services, Newsweek 12/96 



"A Few Profile Bits" - The Future of (Interactive) Marketing 

Jupiter Communications predicts for 1996 that overall web-based ad spend- 
ing will reach 300 million dollars worldwide. A drop in the advertising ocean, but 
significant enough for a serious start. But the interesting issue is not the current 
market size of advertisements on the Internet (Table 1 1), but that interactive mar- 
keting itself evolves as a entirely new way of advertising and selling products and 
services. Consumers have the power to decide which on-line advertisements they 



Table 9: WWW-Advertising: Top on-line spenders and earners 





diSBOD) 


rmMtramS 

ttoSOOO) 


iHfMdHiri t+IO IHI 
(kiSOMl 


rmwIOim 


AMiHcM JUriMt 


1S4 








AT&T 


SI7 




1,171 




C/HO 


237 


S40 


1,031 


im 


am 




5H 






ijwn 




m 




1,343 


Eiiiit 






1,431 


!,»7 


H«r Wir*i 




m 






hrfviwk 




uis 


1,441 


3,713 


hitinwl Sktiflii 


331 












1,2f« 


1,171 


l,iS1 




271 








MO 


231 








AMtiiilff Grfif 






1,314 




Mkimh 


tm 




im 




maoirfci 


m 










SSI 


\M 


im 


7,755 


HtwifSft 








l,«7 








t,00t 




PmhUwiti 




IIP 






SftrtillM 

WbiCtnriir 


111 


m 




1,135 


Tfliwtl 




im 


1,171 


3,701 


ZD Hit 








1.071 


fni* Tilfl 


3,3n 


iw 


13,313 


21,335 



The Itriif nit - On Tli« Vergi o Mn<l«m Sodtty? 
K. Goldhammer f 0 , T. Lange 



New powers to the consumer: 
Interactive marketing will opt for 
their rights to choose 



Webvertising: In the second quar- 
ter of 1 996 spending on adverti- 
sing on the net nearly doubled to 
US$43 million worldwide com- 
pared to the first quarter. For 1 996 
Jupiter Communications predicts 
that overall web-based ad spen- 
ding will reach US$300 million. 



Sources 

Tobie 9: Web Track; Jupiter Communications; 
Screen Digest February/October 1996, 
Business Week Sept. 1996; Wired 
12/96 



65 



ECC .• 



The Inlerrwf - {b Hw Verg# of o Mod«m Sodefy? 

K. Goldhammer/U.T. Lange 



The four C's of webvertising: 
Convenience, Choice, Creativity, 
Connectedness 



31 Invented by Netscape, cookies are supposed to 
store relevant user data while clicking between 
different WWW-pages. They can be designed by 
any content provider on the Internet and stored 
on the user's hard disc drive when clicking onto 
a certain webpage. (On a Macintosh they are 
called MagicCookie, on a PC cookies.hrt). Only 
the latest Netscape browser 3.0 gives the user 
a choice to decide if a cookie should be stored 
or not. 



want to see (The Economist 1995; Forrest/Mizerski 1996, p. 155; Hammond 1996, 
p. 126 -131). This shift in activeness (F&F: Table 8.4.2, p. 352ff.) and the newly- 
gained power of consumers turns former advertising into webvertising, which will 
only get attention if it offers added value. Thus infotainment and gratification will 
be the key techniques for reaching consumers in an interactive environment. But 
webvertising changes the nature of the Internet, as it can only be put into practice 
by the traditional big players, who can afford sophisticated ads almost regardless 
of price. While small companies might only be capable of promoting their Web 
page locally, big companies might webvertise in the most popular sites. “Suddenly 
the Internet is beginning to look a lot less like the much hyped global-village 
market” (The Economist 1995). 

But what should webvertising look like? Instead of the four P’s in the classic 
marketing mix (product, price, promotion and place), Fishburne and Mont- 
gomery suggest focussing on four C’s as elements for “superservice” in an inter- 
active marketing environment: convenience, choice, creativity and connectedness 
(Fishburne/Montgomery in Forrest/Mizerski 1996, p. 283-299). 

I I as products are becoming less distinguishable in terms of quality, 

service and reliability, the actual process of buying differentiates the product. 
Shopping convenience could become a true asset of on-line commerce, be it 
through the process of buying products from one’s desktop or by offering the 
wanted product and the related information as conveniently as possible. Gratifica- 
tion can enhance the on-line marketing convenience and may become the most 
important attraction to draw consumer attention. 

' the implicit structure of the Internet gives consumers the choice to 
decide upon the information being delivered and which products should be 
bought. By finding the information they want, consumers could be enabled to 
draw their conclusions faster, more accurately and with less bias than ever before. 
Supporting the consumer’s need for information and choice will therefore be a 
key instrument of interactive marketing. 

' Tcum-u r in a world of on-line commerce, as we have seen, the advertiser has 
to customise his messages and products to the needs of many different customers 
who take advantage of their newly-gained powers to choose. Creativity doesn’t 
only mean reacting to these different needs of the empowered consumers, but also 
creating new services and offerings for as yet unknown needs. Instead of pure, 
down-to-earth selling, webvertising will have to create infotainment-oriented 
content that attracts customers with its creativity. 

( .onmrk'iini'y on-line selling and buying will have to incorporate tools that 
allow businesses to adapt the needs and desires of customers, thus enabling the 
suppliers to react fast, cost-efficiently and appropriately to their customers. 
Suppliers are already taking advantage of a connected on-line environment by 
tracing information relevant to their customers with the help of cookies. 



t€ 



•• ECC .• 



Cookies are opening new opportunities for market research, advertising and 
sales on the Internet. Invented by Netscape, cookies can be programmed to auto- 
matically store relevant information, regarding consumer behaviour or equip- 
ment. The “few profile bits” could contain information about the software and PC 
in use, about how often someone has used a certain Internet service or competing 
hosts, thus enabling businesses to tailor their offerings. The industry is already 
programming cookies and planting them onto the on-line user’s PC. Whenever a 
person comes across the site that planted a cookie, the stored data is retrieved. 
Advertisers have already set up Internet servers that trace all transferred files for 
relevant information “for market research reasons”. 

Cookies could therefore become the Holy Grail of marketing. The perils of an 
Orwellian marketer’s dream of customer behaviours and preferences that can be 
tracked automatically the moment a customer enters the (on-line) shop in order 
to offer exactly the personally-preferred range of products and services are 
obvious. Other research techniques such as single-source studies could become 
obsolete, as cookies automatically combine convenience and choice to allow 
personalised services. In the future, the concerns of users will have to be 
addressed, and it does not appear unlikely that cookies might become restricted, 
if not prohibited, as the possible dangers of abusing the generated data might be 
too high. While a whole range of assorted problems, from the feasibility of e-cash 
to privacy issues raised by the rise of cookies have not yet been solved, on-line 
commerce has incredible potential both in scope and scale. If the Internet ever 
grows beyond the number of the “happy few” users of today, on-line interactive 
marketing could change our perceptions of buying and selling to a great extent, 
altering the quality of services by offering more choice, more convenience and 
more creativity - and less annoying old school advertisements. 



The Itriifnit - On The Vergi ol o Modem Society? 
K. Goldhammer/U. T. Lange 

Cookies make it possible to re- 
trieve consumer preferences 



The Holy Grail of marketing: auto- 
matically tracking consumer be- 
haviours and equipments for 
personalised services 



67 



fCC .• 



The InJermf - On Ik Ver|)f of u Modem Sotiefy? 

K. Goldhammer/U.T. Lange 

References 

Alfred Herrhousen GesellschaftfOr internotionalen Dialog (eds.) (1995) Multimedia Eine revolutioniire Herausforderung. Perspektiven der Informo- 
tionsgesellschoft. Stuttgart: Schaffer-Poeschl. 

Altobelli, Claudia Fantapie and Hoffmann, Stefan (1 996) Werbung im Internet. Wie Unternehmen ihren Online-Werbeauftritt planen und optimieren. 

Ergebnisse der ersten Umfrage unter Internet-werbungtreibenden, Munchen; MGM 
Argyle, Katie and Rob Shields (eds.) (1996) Is there a body in the net? In: Shields, Rob (ed.) Cultures of Internet. Virtual Spaces, Real Histories, 
Living Bodies. London: Sage. 

Berners-Lee, Tim (1 996) Europe and the info age. Time Magazine, Winter 1 996, p. 1 40-1 41 

Blum, Daniel and Litwack, David (1995) The E-Mail frontier. Emerging morkets and evolving technologies. Reading, Massachusetts: Addison-Wesley. 
Bollmann, Stefan and Heibach, Christiana (eds.) (1 996) Kursbuch Internet. Anschlusse an Wirtschaft und Politik, Wissenschaft und Kultur. Mann- 
heim: Bollmann. 

Booz, Allen & Hamilton (eds.) (1996) Zukunft Multimedia. Grundlagen, Mdrkte und Prespektiven in Deutschland. Frankfurt am Main: IMK. 
Cavoukian, Ann and Tapscott, Don (1997) Who knows. Safeguarding your privacy in a networked world. New York: McGraw-Hill. 

Coupland, Douglas (1995) microserfs. London: flamingo. 

Drake, William J. (editor) (1995) The New Information Infrastructure. Strategies for U.S. Policy. New York: Twentieth Century Fund. 

Economist, The (1995) Internet Survey. London, (http://www.economist.com/surveys/internet/intro.html) 

European Commission (1996) Electronic Publishing Brussels. 

Forrest, Edward and Mizerski, Richard (eds.) (1996) Interactive Marketing. The future present. Lincolnwood: NTC Business Books. 

Gates, Bill (1 995) The road ahead. New York: Penguin. 

Gilder, George (1 994) Life After Television. New York: W W Norton & Company. 

Glaser, Peter (1 995) 24 Stunden im 21 . Jahrhundert. Onlinesein. Zu Besuch in der Neuesten Welt. Frankfurt a. Main: Zweitausendeins. 

Grove, Andrew S. (1 996) Only the paranoid survive. New York: Currency and Doubleday. 

Hafner, Katie and Lyon, Matthew (1 996) Where wizards stay up late. The origins of the Internet. New York: Simon & Schuster. 

Hammond, Ray (1 996) Digital business. Surviving and thriving in an online world. London: Hodder and Stoughton. 

Keynes, Jessica (editor) (1 995) Technology Trendlines. Technology success stories from today's visionaries. New York: Van Nostrand Reinhold. 
Ludlow, Peter (editor) (1996) High noon on the electronic frontier. Conceptual issues in cyberspace. Cambridge, Massachusetts: MIT Press. 

Lynch, Daniel C. and Lundquist, Leslie (1 996) Digital money. The new era of Internet commerce. New York: John Wiley & Sons. 

Morgan Stanley (Meeker, Mary and DePuy, Chris) (1996) The Internet Report. New York: Harper Business. 

Negroponte, Nicholas (1995) Being Digital. London: Hodder & Stoughton. German: (1995) Total digital. Munchen: Bertelsmann. 

Papert, Seymour (1 996) The connected family. Bridging the digital generation gap. New York: Longstreet Press. 

Pavlik, John V. (1996) New Medio Technology. Cultural and Commercial Perspectives. Needham Heights, Massachusetts: Allyn & Bacon. 

Shields, Rob (editor) (1 996) Cultures of Internet. Virtuol spaces, real histories, living bodies. London: Sage. 

Stoll, Clifford (1995) Silicon snake oil. Second thoughts on the information highway. New York: Doubleday. 

Tapscott, Don (1996) Digital Economy. Promise and peril in the age of networked intelligence. New York: McGraw-Hill. 

Turkle, Sherry (1 996) Life on the screen. Identity in the age of Internet. New York: Simon & Schuster. 



sa 



ECC 



Klaus Schrape/ Wolfgang Seufert 



The Economks of New Information and 
Communication Technologies: Markets, 
Growth and Employment 



‘There are widespread expectations in ptditical and economic 
circles in the western industrialised countries that, besides Mihsti 
tut ion etlects. a growth impulse will he generated and the media 
and vomnumication sector will grow taster than the economy as a 
whole ‘ 




Klaus Schrape 



Deputy Director of Prognos AG, Basel and Managing 
Director of the Media and Communication Depart- 
ment, also Professor of Sociology and Media 
Studies at Basel University. 

Academic training in sociology, psychology, economics 
and statistics at Kiel and Basel Universities (PhD, 
1 977) . As a member of Prognos A6, author of numer- 
ous studies for public and private institutions in 
Germany and Switzerland, e.g. most recently Digitales 
Fernsehen: Morktchancen und ordnungspolitischer 
Regelungsbedarf (Munchen 1995) ond Kunftige 
Entwicklung des Medien- und Kommunikationssektors 
in Deutschland (in cooperation with DIW, Berlin 
1996). 



New Multimedia Applications: Simultaneous Product 
and Process Innovation 70 

Digitalisation and New Media Products 70 

New Media Products as Process Innovation 71 

Multimedia, Growth and Employment 72 

The Rate of Diffusion of New Multimedia Goods and Services 74 

Market Segmentation and Constraint / Bottleneck Problems 75 

Private Consumer Acceptance and Demand 79 

Acceptance by the Business and Public Sectors 88 

Growth and Employment in the Media and Communication Sector 92 

Indicators to Measure Sectoral Growth 92 

Expected Employment Trends in the Media and 

Communication Sector as a Whole 94 

Expected Employment Trends in Various Branches of the 
Media and Communications Sector 1 00 

The Effects on Employment in the Economy as a Whole 1 01 

Qualitative Effects - The Dimensions of Potential Structural 
Change Due to Multimedia Applications 1 01 

Quantitative Effects - Increase in the Overall Level of Employment 1 03 

Resume 1 07 




Wolfgang Seufert 



Researcher and consultant, Deutsches Institut fOr 
Wirtschaftsforschung Berlin (DIW), Department for 
Media and Communications. 

Academic training in economics and communication 
science at Freie Universitat Berlin (MSc. in 
economics, 1981; PhD in communication science, 
1 989). Research projects for European and German 
institutions on economic issues of media and 
communication, e.g. Economic Evaluation of the 
Impact of Telecommunication Investments in the 
Communities (Brussels 1984), Competition in 
German Broadcasting Markets (1992), and Future 
Structure of the German Media Sector (since 1995). 



69 



•• £CC .• 



EcQiKHnics oE New \Ch 

K.Schrape/W, Seufert 

New Multimedia Applications: Simultaneous Product and 
Process Innovation 



Offline versus online multimedia 
products and services 



Lower costs will change relative 
prices 



Digitalisation and New Media Products 

The rapid progress made in digitalising electronic production, transmission, 
and storage processes for a wide variety of media has created a huge innovation 
potential for new electronic media, which, in future, will supplement - and to 
some extent substitute - existing media products. It has become standard prac- 
tice to subsume developments in various sub-areas - digital TV, digital radio, 
digital video discs etc. - under the rubric “multimedia applications”. This term has 
thus taken on a similar function to the term “new media” at the start of the 1980s, 
when it was cable and satellite technology and videotext services that were the 
prime foci of attention. From the users’ point of view, the central features of the 
new multimedia products are the greater scope they offer for interaction and for 
combining previously separate media types (text, animation, pictures, audio, 
video). A distinction can be drawn between so-called offline and online multi- 
media products and services. 

* In the case of offline systems, the services and programmes (e.g. reference 
works, learning programmes) can be used interactively and are stored on a 
medium. By means of digital compression and rising storage density, the 
quality of supply will increase enormously compared with the current systems 
and will increasingly be able to incorporate video sequences. 

* Online multimedia involves the interactive use of programmes and services 
that are offered by external computers (so-called servers) and which can be 
called up via the telephone line or wireless forms of telecommunication. A 
distinction needs to be made between systems which merely permit the selec- 
tion from a very large number of distributed programmes (e.g. near- video-on- 
demand through scheduled programmes of the same content) and genuine 
interactive services offering individual access to stored data (e.g. video-on- 
demand) or services linked to communication services (e.g. electronic sales 
catalogues with the option of placing an order directly by computer). 

In the wake of these product innovations, those areas of the economy pro- 
ducing or distributing media and communication goods will undergo major 
structural change. The costs of the electronic production and distribution of 
media can, due to digitalisation, be expected to follow a more favourable trajec- 
tory than, for instance, the costs of producing print media or of the physical trans- 
port of media products. Due to these changes in relative prices, substitution 
effects between “old” and “new” media are likely, and these will lead to correspon- 
ding changes in the media budgets of consumers. 

Yet there are widespread expectations in political and economic circles in the 
western industrialised countries that, besides these substitution effects, a growth 
impulse will be generated and the media and communication sector will grow 



70 



ECC 



faster than the economy as a whole. This is either because the attractiveness of the 
new multimedia products will induce users to cut back on other activities (chan- 
ges in consumers’ time budgets), or also due to changes in relative prices, whereby 
it is thought that the prices of the new media products will develop more favour- 
ably not only than those of “old” media, but also with respect to most other 
commodity groups (changes in overall consumer budgets). 

Price trends of this nature may arise due to technical progress in microelec- 
tronics. In addition, though, global markets are expected to develop for the new 
multimedia products, generating a relatively high degree of competitive pressure, 
and thus pressure on prices, in this area. Such globalisation is expected given the 
signs of a global standardisation of offline multimedia technology and the fact 
that in the longer term all offline multimedia products will be able to be marketed 
globally via telecommunications infrastructures adapted for this purpose. 

New Media Products as Process Innovation 

Yet the new multimedia products and services will not only be demanded by 
private households as a product innovation, thus leading to changes in the struc- 
ture of consumer demand. New and cheaper media and communication goods 
also constitute a process innovation throughout the economy, within which 
internal and external communication, the search for information and its subse- 
quent processing, constitute a significant element of the production process. 

It is these potential applications of the new information and communication 
technologies that have placed the media and communication sector at the centre 
of the current global debate on the correct path for the western industrialised 
countries to take towards an “information society”. 

Generally it is posited that, while the new multimedia will lead to major struc- 
tural changes on the labour market with regard to skills and working conditions, 
a growth impulse for the economy as a whole will also be induced, which will 
significantly raise the level of employment as a whole, and thus help to solve the 
problem of unemployment in the industrialised countries, and especially in the 
EU.i 

This optimism seems to contradict the so-called productivity paradox that has 
characterised experiences so far with the deployment of information and com- 
munication technologies: although information and communication technolo- 
gies increased markedly as a proportion of overall investment throughout the 
world in the 1970s and 1980s, rates of productivity growth declined over this 
period in all western industrialised countries.^ 

In this context it has been argued that the deployment of the new technologies 
itself will not lead to perceptibly higher productivity, but rather the more efficient 
organisational processes that they make possible: it is argued that the required 
changes in corporate organisation will take time. 



Etonofnks of Niw Ids 
K, Schrape/W. Seufert 



Technical progress and globalisa- 
tion force prices down 



Communication is a significant 
element of the production process 



1 See also Ifo-lnstitut, Qualitative und quantitative 
Auswirkungen der Informotionsgesellscliaft auf 
die Beschdftigung, Report commissioned by the 
Federal Ministry of the Economy, Munchen 
1996. 

2 Berndt, E.R./Malone, T.W., Informotion tech- 
nology and the productivity paradox: getting the 
questions right, in: Economics of Informotion 
and New Technology, Vol. 3 No. 3-4/1995. 



71 



ECC .• 



Ecofiomks of Ntw ICH 
K. Schrape/W. Seufert 



Different qualities of the new 
generation of information and 
communication technologies 



3 Erber, G./Hagemann, H., Zukunftsperspektiven 
Deutschland im internationalen Wettbewerb: 
Industriepolitische Implikationen der Neuen 
Wachstumstheorie, Berlin/Stuttgart 1995. 

4 Clinton, W.J./Gore, A., Technology for 
America's Economic Growth: A New Direction to 
Build Economic Strength, President's Office, 
Washington D.C. 1995. 

5 Kommission der Europaischen Gemeinschaften, 
Wachstum, Wettbewerbsfdhigkeit, Beschafti- 
gung. Herausforderungen der Gegenwart und 
Wege ins 21. Jahrhundert, Weifibuch, Luxem- 
burg 1993, (Bulletin der Europaischen Gemein- 
schaften, Beilage 6/93), and Kommission der 
Europaischen Gemeinschaften, Europas Weg in 
die Informationsgesellschaft - ein Aktionsplan, 
(KOM (94) 347 endg.). 

6 Telecommunications Council, Ministry of Posts 
and Telecommunications Japan: Reforms toward 
the Intellectually Creative Society in the 21st 
Century, May 31, 1994. 

7 G7-Konferenz uber die Informationsgesellschaft 
am 25. und 26. Februar 1995 in Brussel, 
SchluBfolgerungen des Vorsitzes. 

8 OECD Workshop on the Economics of 
Information Societies, Workshop No. 1, Paris 
1996. 

9 VDMA/ZVEI (Ed.), Wege in die Informations- 
gesellschnft. Status Quo und Perspektiven 
Deutschlands im internationalen Vergleich, 
Frankfurt/Main 1996. 



"promoting the development and application of new multimedia 
products and services is thus seen as a central instrument of a more 
general growth and employment policy that goes far beyond 
mere support for a single promising economic sector/' 

It has also been claimed that the new generation of information and com- 
munication technologies are characterised by specific factors that distinguish it 
from old information and communication technologies. It is no longer the opti- 
misation of internal information processing or that of production processes 
(CAD, CAM, CIM etc.) that constitute the central concern of the new applica- 
tions, but the optimisation of external communication and the creation of know- 
how. This, it is argued, will lead to a new form of national and international 
specialisation between and within corporate networks and to an accelerated 
accumulation of knowledge. According to new growth theories, this leads to faster 
technological progress and thus faster overall economic growth.^ 

Multimedia, Growth and Employment 

From such a perspective, promoting the development and application of new 
multimedia products and services is thus seen as a central instrument of a more 
general growth ind employment policy that goes far beyond mere support for a 
single promising economic sector. 

Accordingly, in recent years under the rubric of the “highway to the informa- 
tion society”, all the leading industrialised countries have taken initiatives in this 
area. 

The USA in September 1993 with the Clinton/Gore initiative “The National 
Information Infrastructure - Agenda for Action”;"* The European Commission in 
December 1993 with its White Paper on “Growth, Competitiveness and Employ- 
ment” and the subsequent Bangemann report “Europe and the Global 
Information Society” (January 1994);^ Japan with a study by the national tele- 
communication council into the development of a Japanese info-communications 
infrastructure, published in May 1994 under the title “Reforms toward the Intellec- 
tually Creative Society in the Century”.^ 

Also of note are the efforts now being made to coordinate at international level the 
initiatives emanating from these action plans. For instance, at the start of 1995 a 
summit meeting dealing solely with the topic of the information society was held 
within the framework of the G7 consultations. ^ In addition the OECD has 
increasingly become a discussion forum for economic aspects of information 
societies, by virtue of its Information, Communication and Computer Policy (ICCP) 
committee that has commissioned studies and organised workshops on these topics.^ 

Compared with the policy concepts pursued in the 1980s in the context of 
support for new information and communication technologies, a number of 
central changes can be observed. With the exception of Japan, where to a large 
extent support funding is currently being directed towards the creation of fibre- 
optic networks,^ the question as to the correct infrastructure policy for govern- 
ment - in France and Germany, for instance, for many years discussed in terms of 
the opposition fibre-optic versus copper - is of only subordinate importance. 
Rather, government is relying on competition between private firms, which is 



72 



■■ ECC .• 



supposed to lead to swift cost reduction and thus to a rapid dissemination of the 
supply of hardware, media products and information services. In Germany this 
deregulatory strategy has become particularly evident in recent months with the 
passing of the Telecommunication Act (the remaining elements of the telecom- 
munications monopoly are to be abolished by the end of 1997), agreement 
between state prime ministers to amend the state treaty on radio and television 
(marked increase in the maximum market share in radio and televisions 
programmes transmitted nationwide) and the contours of the planned central 
government “Multimedia Act”. 

This deregulation strategy is in line with the underlying policy concepts 
pursued by the other leading industrialised countries, although with a view to 
international competition between countries as a production location govern- 
ments have not refrained entirely from state support programmes. The regional, 
national and EU support measures concentrate - and this also constitutes a 
departure from previous practice - more on pilot applications in selected ap- 
plication areas (such as transport telematics, telemedicine or teleworking) than on 
support for certain information technologies or individual media and communi- 
cation branches. The same is true of the USA.^^ 

Expectations in political circles are high in the face of the prevailing problem 
of unemployment. It is estimated that on top of the 18 million registered unem- 
ployed in the EU a further 9 million are looking for work. Japan is stuck in the 
longest economic depression since the Second World War. The USA, on the other 
hand, which over the past decade has enjoyed the greatest success in creating new 
jobs, can point to the major contribution made to job creation by the information 
and communication sectoral Consequently, prognoses that point to a significant 
growth and employment impulse from multimedia applications are eagerly 
greeted by politicians and are being exploited to promote the acceptance of a 
rapid introduction of the new multimedia technologies despite the inevitable 
substantial structural changes on the labour market that they imply. The follow- 
ing can be cited as examples of such optimistic prognoses: 

A study by Arthur D. Little conducted in 1994, according to which around 
5 million new jobs are to be created by multimedia in the EU by the year 2000 ;^^ 
the study by the Japanese telecommunication council mentioned above, 
according to which more than 2.4 million jobs could be created in Japan by the 
new multimedia market by the year 2010; a study by the Council of Economic 
Advisors (CEA) to the US President, which postulates that an accelerated devel- 
opment of a national information infrastructure would create an additional 1.7 
to 2.0 million jobs in the USA to the year 2003.^3 

There are a whole series of other studies which suggest in some cases even 
higher, but in others significantly lower, employment effects. To some extent this 
is linked to the fact that three causal levels need to be distinguished, that in the 
public debate are frequently confused: 



E{(Miofnks of New tds 
K, Schrape/W. Seufert 



Deregulation in all major coun- 
tries, but also state support 
programmes 



10 op. cit. 

11 Siwek, S.E./Furchtgott-Roth, H., Coyrigfit 
Industries in the US Economy: 1993 Perspec- 
tive, ilPA, Washington, October 1993. 

1 2 A.O. Little, Multimedia: Europa am Scheideweg. 
0.0,1994. 

13 Council of Economic Advisors (CEA), Economic 
benefits of the Administration's legislative 
proposals of the telecommunication's, Wash- 
ington 1994. 



73 



ECC 



EcoiKMfiics of New \Ck 

K.Schrape/W. Seufert 



Three causal levels to be distin- 
guished in the employment debate 



Market prognoses differ too 
widely to permit their compara- 
tive evaluation 



14 ifo-lnstitut,op. cit., pp. 14-15. 



♦ quantitative employment effects resulting from the sectoral growth of those 
branches producing media and communication goods; 

♦ quantitative employment effects at the macroeconomic level generated by the 
deployment of the new information technologies in all areas of the economy; 

♦ structural or qualitative employment effects arising out of changed occupa- 
tional contents or changes in work organisation, for example due to the intro- 
duction of teleworking. 

Secondly, the prognoses are naturally based on differing underlying assump- 
tions and/or use different methodological procedures to estimate the quantitative 
effects and thus arrive at different results. 

The aim of this paper is to present the spectrum of expectations associated 
with the new multimedia applications, as manifested by various recent studies 
into their growth and employment effects, and - as far as possible - to shed some 
light on the assumptions and methods underpinning these studies. 

The first section deals with the spectrum of expectations regarding the devel- 
opment of the market for information and communication goods, and in 
particular with the pace of the diffusion of new multimedia applications. In the 
subsequent section we analyse the expectations derived from this for the sectoral 
growth of the information and communication sector. Finally a number of studies 
that have attempted to quantify the growth and employment effects of the new 
media and communication technologies at the macroeconomic level are analysed. 

In the concluding resumee we address the question as to the significance that 
should be attached to the employment argument on the basis of these empirical 
studies in designing a regulatory framework for the media sector. 

The Rate of Diffusion of New Multimedia Goods and Services 

Positive employment effects are to be expected if technological progress in the 
field of media and communication technologies and the new services, pro- 
grammes and applications this progress makes possible generate market growth 
that both raises labour productivity through process and product innovation and 
is sufficient to more than offset intrasectoral (and, where appropriate, intersec- 
toral) substitution effects. 

During the past three years a large number of market prognoses of the 
development of telecommunications and multimedia markets have been pub- 
lished, a synopsis of which has recently been put forward by the ifo-Institute.^^ 

These market prognoses differ too widely to permit their comparative evalu- 
ation. The differences begin with the geographical areas covered, affect the defi- 
nition of the market (the sub-markets considered), and involve the extent to 
which the assumptions made and the forecasting methodology can be examined 
and appear well-founded. 



74 



"ihe only thing that these prognoses have in common is 
that they tend to predict high rates of expansion and turnover 
growth for the media and telecommunication market. 



ECC .• 



Econofnki of N«w tCIs 
K, Schrape/W. Seufert 



The only thing that these prognoses have in common is that they tend to 
predict high rates of expansion and turnover growth for the media and telecom- 
munication market. 

This section uses trend scenarios on the development of media and communi- 
cations expenditure by three demand segments (private households, firms, 
government) to examine - primarily for Germany - whether the trends expected 
can in fact be financed. It is only possible to mention at this point the urgent need 
for a comparative, EU-wide study of this subject. 

Market Segmentation and Constraint I Bottleneck Problems 

In order to produce scenarios of the expected development paths of the diffusion 
and demand and applications of the new multimedia goods and services it is first 
necessary to divide the market up into segments. There is no sign of a consensus on 
this point. At least three different perspectives are in competition at present: tech- 
nology-centred, distribution-oriented and media content oriented perspectives. 

The field of new digital media can be usefully structured by means of the 
following cross-classification (Figure 2.1). 



Figure 2.1: The Structure of the Market for Electronic Media 





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On the supply side the online segment can be sub-divided further, namely into 
the subsegments “narrowband”, “broadband” and “terrestrial” (Figure 2.2). 

In order to generate demand scenarios, this segmentation on the supply side 
must be seen in the context of the distinction between three demand-side groups: 

♦ the business sector (firms of various size categories and industries); 

♦ the public sector (public institutions such as administrative authorities, health 
and transport organisations, schools, universities, research institutes, libraries); 

♦ the consumer sector (private households with their needs regarding com- 
munication, information, entertainment and education). 



Three different perspectives: tech- 
nology-centred, distribution- 
oriented and media content 
oriented 



Three demand segments: busi- 
ness, public institutions, private 
households 



75 



ECC .• 



EtiMomks d Niw Ids 

K. Schrape/W. Seufert 



Figure 2.2; Segmentation of the Multimedia Market 





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. UMilMMik 




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These three demand segments - which would have to be sub-divided further 
to permit a more highly differentiated prognosis - each exhibit specific conditions 
for the diffusion of multimedia demand. This is also true, by the way, of different 
countries in a cross-country comparison. Among others, the following influen- 
tial factors need to be considered: quantitative relations (number of demand 
units), equipment requirements, objective needs, purchasing power or potential 
for raising finance, decision-making structures, time budgets, competence 
requirements and acceptance. Seen from the perspective of a desire for rapid 
diffusion, the various demand segments can be considered as being characterised 
by different “constraint problems”. 

As a result of these differences in initial conditions, the three demand seg- 
ments exhibit different innovation-diffusion trajectories over time with respect to 
multimedia goods and services. 

In all the demand segments the pace of diffusion will depend decisively on 
whether it is possible to solve these constraint problems - and if so, how quickly - 
and thus to provide cost-effective services and programmes to demanders/users 
that have great utility value in solving the latter’s problems (Figure 2.3). The 
constraints can be divided up into three major groups: 

♦ constraints that facilitate or restrict the supply of multimedia goods and 
services (technology, competition, the political-legal framework); 

♦ constraints that restrict the creation and provision of attractive goods and 
services by firms; 

♦ constraints that hinder or delay rising acceptance, demand and utilisation. 

The first two constraint fields will, as it were, be “placed in front of the 
brackets”, in the following discussion, in order subsequently to be in a position to 



76 



ECC .• 



E(i>nomks of N«w \Ck 

K, Schrape/W. Seyfert 



Figure 2.3: Constraint Problems in Opening up the Multimedia Market 







* ol th« tichnologif (standordbation) 


^ . - -.■-—* 3-- - 

uHptitiiTi fmra||n 


* fMnm 




• lagulolory framfwork 


Si^/Sipplirf 


• SkifcAnov4iinv 




* Otskin of progrvnntis/Mrvkis 




* OistriboHdn dionnik 




* PricipotcvUiKh} 


OMHld tipiMfll 


• tMod for proUtni lokrtbfl/ottopliorai 




• «|uipnwrl riquirifranh 




• fimncinB 




* (omfitlinto/lNniing [urvt 



deal with the diffusion of acceptance and demand in the consumer, business and 
public sectors in separate sections. 

The enormous dynamic in the field of digital technology means that no tech- 
nical limitations are at present conceivable regarding the multimedia goods and 
services currently “in the pipeline”. The technological requirements have, there- 
fore, in principle been met, but in many cases the products are still a long way 
from being ready for the market (maturity). Often years pass between laboratory 
trials and prototypes and standardised products constituting lasting and market- 
able solutions. Figure 2.4 illustrates the points in time at which the leading tech- 
nological applications can be expected to have achieved market maturity. In addi- 
tion, standardisation and stable expectations for all those participating in the 
value-added chain are central elements in facilitating the marketability of systems 
products and applications. 



Figure 2.4: Market Maturity of Leading Technologies'^ 





Vmt 


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nmUmmMmtK 


\m 


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* HllOpbll 






* mitniwiBn of Mtnrki 


&trvkis M ^■Mnd 


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* Hnw lidiwiify {wiiOkiirt 




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II 




* itaidariiiisn of A0SI aid ATM ttdiHbfy 


ndtaidiK 




* rifinif ixisliif hoiH rliOikian lyiliin and IviiiiOl 






* tilin&n tiri-i|lk mOwl 


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kill 1 1ff !(#■ Mint 


* tlwdifdbiiQn if AIM lnkwiipf 


wnim [rnr); 




* dmfH la hNwIi md Imm MihMiifon lyitiiii 



* rilMlii mvKpnHm if taiiiil iffliMii 



No technical limitations, but mar- 
ket maturity problems 



* Figure 2.4: 

NB = narrowband 

BB = broadband 

OTV = digital television 

VOD = video (or multimedia) on demand 

ITV = interactive television (or services) 

BC = broadband communication networks (cable IV) 
ATM = flexible package switching technology for 
broodbond services 

ADSL= transmission switching technology for video 
on demand via the telephone network 



77 



ECC .• 



Ecimomics d Ntw Ids 

K. Schrape/W. Seufert 



Development of multimedia pro- 
grammes and services still In the 
"trial and error" phase 



Price policy as constraining factor 



Market maturity does not mean market availability, however. Between the two 
comes the capital-intensive and costly construction and extension of distribution 
channels and network infrastructures and of local or regional marketing and 
service organisations. (Examples include mobile telephones, internet/online 
services, digital television). Only once this is in place can the various demand 
segments “on the ground” be reached and exposed to the necessary marketing and 
communication pressure. This factor tends to be hugely underestimated in terms 
of the delays in market development it implies. 

A third factor that can serve as a constraint in the start-up phase of market 
development is the statutory and regulatory framework. In a similar way to tech- 
nological standards, clear political-statutory rules, implemented at the right time, 
create a secure environment within which the various actors can plan for the 
future and thus help to accelerate development from the supply side. 

The development of multimedia programmes and services, i.e. of the actual 
problem-solving capacity for the demand segments, is currently still in the “trial 
and error” phase and is consequently not yet highly professionalised. 

^ Most suppliers of multimedia products come from various branches of the 
media and communication sector (e.g. data-processing software, publishing, 
audio-visual producers etc.) and have only some of the qualifications, skills 
and rights required for multimedia productions. The required know-how is 
accumulated on the principle of learning by doing and thus grows slowly. 

* It is difficult to obtain skilled personnel holding the know-how combinations 
required for multimedia productions as training courses are adapting only 
slowly to the changed requirements. 

* The factors relevant for determining the success of suppliers and marketers of 
multimedia productions are only gradually becoming apparent. 

* The “gold-digger mentality” characteristic of the initial phase, with hopes of 
quick returns in a booming market (CD-ROM products) has led to deficien- 
cies in client and target-group-oriented product development. 

The above diagnosis applies in particular to multimedia products oriented 
towards consumer sector demand, less so to multimedia goods and services for 
commercial use. The lack of professionalism in product development poses the 
danger of the market being flooded with products whose utility value to users is 
extremely limited. This would be counter-productive in terms of the diffusion of 
acceptance and demand. At the same time, these supply-side constraints consti- 
tute strategic points of leverage for complementary policy measures in support of 
multimedia development (cf. the relevant support programmes initiated by the 
EU and the national policies of the various European countries). 

The last, but by no means least important, constraint - or influential factor - 
to be mentioned on the supply side is price policy. Even if the programmes and 
services offered are developed in highly professional fashion and have great utility 



78 



ECC 



^onofnks of Ntw fds 
K, Schrape/W. Seufert 



value for users, this will be of little benefit in terms of diffusion if the price level 
is prohibitively expensive for the target group in question, or if the overall costs 
which must be met to benefit from this utility - hardware, software, link-up costs 
and charges, service provider, programme-server charges etc. - exceed a certain 
price threshold considered acceptable; the same is true if the potential customers 
are unclear as to the costs involved. 

In the preceding paragraphs we have discussed the constraints on the supply 
side. Time is required to solve each of these problems and each step forward is 
contingent on the - more or less successful - solution of other problems. The overall 
pace of the innovation-diffusion process depends centrally on whether, and to what 
extent, the actors on the various levels manage to network problem solutions in a 
compatible and self-sustaining way. The following scenarios of demand trends are 
set within a theoretical framework provided by innovation- diffusion research. 

Private Consumer Acceptance and Demand 

Market development strategies and expectations - if they are to be successful 
or realistic respectively - must be oriented towards the prevailing initial and the 
foreseeable conditions for development. These conditions can both open up 
opportunities and also limit the scope for development. 

The initial conditions for the diffusion of the demand for multimedia by 
private households include, besides the current supply of goods and services and 
the endowment of private households with appliances and connections, struc- 
tural characteristics of the private demand segment - age structure, education 
structure, income and expenditure structures, social milieu structure etc. - which 
together determine the degree of acceptance. 

The most important conditions for the on-going development of private 
demand are: the leading macroeconomic aggregate variables (GDP, private 
consumption), independently of this, spending on media and communication 
goods and services over time, changes in leisure time and media-usage time and 
diverse factors, some of them supply-dependent, influencing the acceptance level. 

It is immediately apparent that both the initial and the development condi- 
tions for diffusion exhibit an enormous degree of variation across the European 
countries (and beyond). For this reason alone, a cross-national comparative pre- 
sentation would go far beyond the bounds of this paper. An additional factor in 
this context is that current, internationally comparable data on most of these 
conditions are not available or can only be obtained and processed at great cost 
in terms of resources. It is for these reasons that the diffusion scenario is oriented 
primarily towards Germany by way of a case study. 

The initial endowment of German households with multimedia appliances 
and connections can be illustrated statistically. The following figures have been 
collated from secondary sources for Germany as of the end of 1995 (Figure 2.5) : 



Conditions for diffusion in the pri- 
vate sector 



Variations across Europe 



79 



•• ECC .• 



EcQfKHnks of New ICE 
K. Schrape/W. Seufert 



Australia leads in PC density, the 
US and Canada in Internet access 



Sources 

Figure 2.6: IriS-lnstitute. Figures refer to end of 
1995/start of 1996. Basis: Adults 
aged 18 or over. 



Figure 2.5: The Initial Situation for Consumer Multimedia Markets (Germany end of 1995) 



Markil liyi— 1i 


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V 


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1.0 


3 


Iftlmtl wJkm pwrmiyfi 


1.5 


4 


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rci 


1.2 


25 


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V 


10 


K wM mmium 


U 


5 


VUitlWtfWHlJH* 


J.S 


20 


■■ 




100 



These figures can be compared with the results of a recent international survey 
conducted by the IriS Institutes (Figure 2.6): 



Figure 2.6: International Comparison of Private Household Multimedia Endowment 



Cmfrin 


K t— t4|i (%1 «l kt—(%l bli—l «•» 

Hb— ■(%} 




Anif«fa 


44 1 


0 5 


II 


USA 


IT 1 


1 1 


IS 


Cwrii 


3i 1 


t 1 


12 


HiJiki 


12 


1 2 


51 




41 


1 4 


84 


Swfituriwd 


41 


9 3 


70 


SwiJ— 


32 


f 5 


11 


Mmi 


31 1 


0 4 


01 


Cm— y 


27 


i 2 


M 


Omt IrM— 


21 


5 2 


74 


F—n 


17 


3 1 


81 


Sf* 


21 


2 Ml 


44 


I4.tr 


17 


2 1 


55 


ftftffii 


14 


2 M 


S« 


Ciprw 


13 


4 1 


31 


CfMt* 


13 


3 1 


54 


Tirlty 


1 


7 1 


57 



There are substantial differences in the German figures for PC and modem 
ownership and Internet access. Different figures describing the present situation 
are also likely to be the case for other items and for other countries. Irrespective 
of the uncertainties of the data, the IriS results permit the following comparative 
conclusions to be drawn on the state of development in three important sectors 
of the multimedia market. 



ECC .• 



Econofnks of Now tCTs 
K, Scfirape/W. Seyfert 



* ( >rniiR‘ mullinicdui: In all the countries listed the PC ownership densities 
show that the critical mass for a self-sustaining diffusion process (around 
10%) has been achieved. At the same time, the figures on the number of PCs 
at the end of 1995 also indicate major differences in the speed with which PCs 
have been adopted, differences that are clearly contingent not only on 
purchasing power, but also on the availability and acceptance of “software”. All 
the English-speaking countries (with the exception of Great Britain) and those 
with a great affinity to English language and culture (e.g. NL, S, SF, CH) 
exhibit a higher PC endowment than, for instance, Germany, France and the 
Mediterranean countries. 

* Njrmwband online iini It i media (internet/WWW and online services): The 
level of acquaintance with internet/WWW exhibits a similar distribution to 
that of PC endowment. Somewhat surprising are the relatively (i.e. compared 
with the number of PCs) low level of familiarity in Mexico, Germany and 
France, to a lesser extent also in Switzerland and Great Britain. One possible 
explanation is related to the existence of milieu differences between these 
countries. Except in the USA, Canada, Australia and Finland,!^ household 
endowment with modems or internet/WWW access are still below the critical 
mass for a self-sustaining take-off of diffusion. Another striking phenomenon 
are the still very low figures in the core countries of the EU and in the Medi- 
terranean countries. 

* Bmadhand online miilliiiiedia (digital television): Digital television was not 
launched in Europe until 1996,^^ initially in Italy, followed by France and, at the 
end of July, Germany. Plans exist to introduce digital Pay TV in Spain and Great 
Britain. The forecasts for the number of subscribers expected to join by the end 
of 1996 are unanimously cautious. Here, too, there are substantial differences 
between the European countries with respect to technical endowment and con- 
nection requirements: cable connections or satellite reception (Figure 2.7) and 
the penetration of (so far analogue) Pay TV subscriptions (Figure 2.8). 

These differences in the acceptance of Pay TV are generally explained in terms 
of national differences in the supply of free television programmes (public or 
private). The hypothesis is that the better the supply of free TV, the lower the 
acceptance of and willingness to pay for Pay TV. Yet other factors - such as the 
charges for public television, disposable income, spending on media and com- 
munication as a proportion of private consumption and, more generally, the 
acceptance of television compared to other leisure activities - are also likely to be 
relevant. 

The current global situation with regard to broadband services^^ for the 
consumer sector (such as video or media on demand, teleteaching, telelearning, 
home shopping, interactive video games) has yet to move beyond the stage of 
trials and pilot projects. In Germany the planned pilot projects have not even got 
under way yet or, as in Stuttgart, were cancelled after numerous delays. The 
picture derived from the (provisional) results published of field trials in pioneer 



Critical mass for a self-sustaining 
diffusion process: around 10% 



15 Clearly, as is the case with mobile phones, the 
settlement patterns and density of a country and 
the costs of telecommunication clearly play a 
role in determining the speed ot which com- 
munication technologies are adopted. 

16 In the USA, by contrast. Direct TV commenced 
operations at the end of 1994. 

1 7 Generally termed "interactive television". 



81 



•• ECC y 



Ecofiornks of Niw ICH 

K. Schrape/W. Seufert 



TV reception: cable highest in the 
Netherlands, satellite in Croatia 



1 8 In view of the enormous costs of setting up fully 
interactive broadband networks and the high 
costs of developing broadband services. 

Sources 

Figure 2.7: SES/MGM MediaGruppe MOnchen 
(1995) 



Figure 2.7: How TV-Households in Europe Receive their Programmes 



Ctwirlii 


i 

1 


Silrfitoli% 


1! 




Antrit 


10 


35 


30 


35 




40 


4 


Of 


5 


CfMtia 


07 


SO 


7 


43 


CikIi Iff. 


40 


22 


f 


4f 


DtMMrfc 


2.3 


42 


20 


30 


FiM 


2.0 


5 


41 


54 


Fr«K« 


200 


5 


f 


04 


CcTMiy 


311 


2f 


44 


27 




3.7 


25 


31 


44 


kM 


Of 


0 


47 


45 


if^r 


202 


2 


0 


fO 


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0.1 


4 


fO 


4 


J. 

iwnMnHn 


4.3 


5 


f1 


4 


Ntrwvy 


1.0 


17 


35 


40 


PtM 


117 


15 


20 


45 


Pwtffd 


11 


0 


0 


f2 


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17 


43 


14 


41 


Slmii 


07 


25 


40 


35 


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117 


4 


3 


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SwWm 


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12 


40 


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SwititrM 


If 


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00 


11 


UK 


224 


15 


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00 



countries (USA, Canada, Great Britain, Japan, Hong Kong) is extremely hetero- 
geneous, a fact that points to sharp socio-cultural differences in acceptance. Hav- 
ing said this, the current levels of acceptance, willingness to pay and utilisation of 
video on demand, for example, would not appear to be sufficient to ensure self- 
sustained economic development^^ in the foreseeable future. 

In order to complete our description of the initial situation, it is necessary to 
specify the “acceptance potential” for multimedia and its distribution within the 
population. Two premises can be taken as a point of departure here. 

♦ The multimedia dynamic increasingly leads to “cultural lag”: attitudes, needs 
and skills change more slowly than technological and economic progress and, 
moreover, follow a rather “capricious” learning curve. 

♦ There is no such thing as “society” or “ the consumer”. Rather, all countries are 
characterised by a multiplicity of different social milieus, life-styles and target 
groups. Accordingly, the conditions required for acceptance (learning require- 
ments, willingness to learn, skills, endowment and utilisation requirements) are 
fragmented. This asymmetric distribution also applies to purchasing power. 



82 



•• ECC .• 



Figure 2.8: Number of Subscribers to Movie Pay TV Channels 



Cipilrin 


Nhm 


InA 


SihiiAii 




TVIwiifciM 








1ff4(kl0ii| 


1994 /95<h^ 


FimiIt^Ii % 


kwtint 


frtwiwi 


1/91 


41.0 


30 


1.4 




Rimnit 


\W 


110.0 




4.5 




OralPlifi 


9/15 


161.7 




4.0 


OtMMrk 


npfnnvf 


t/li 


tO.0 


7.3 


35 


FldciJ 


Rtmoif 


1/U 


40.0 


7.0 


7.4 


FfMCt 


CnvlPlfi 


11/M 


3,070.0 


70.1 


18.6 


Qtmmf 


'Prmwi 


Z/91 


861.6 


37.1 


7.7 


GrtKt 


Tvn» 


12/M 


6.0 


7.0 


0.3 




cdflwiwi' 

fWnwm 


10/94 


3.0 




0.1 


Itriy 




4/91 


6SO.O 


70.7 


3.7 


NttlufMi 


wwaWm 


m 


180.0 


63 


79 


Spill 


CondFln 


9/90 


969.6 


n.7 


83, 


Swtdii 


nifrai 


4/H 


31S.0 


39 


5.5 




TVtOQO 


t/19 


307.0 




7.7 


OK 


111 Ounfiil 


J/90 


356.0 


776 


1.6 




^ylhfhm 


2/99 


560.0 




7.5 




SkrUTMC 


9/90 


7,140.0 




9.5 


Ntrwif 


Fftciiii 


9/17 


3S.0 


18 


7.1 


Switiifivd 


iMyfa 


11/11 


90.3 


7.9 


3.1 


T«y 






10,757.7 


135.6 


7.9 



Efoiwnkt of N«w fCh 

K. Schrape/W. Seufert 



France leads in Pay TV penetration 



The hypothesis of a milieu- specific acceptance differential receives support 
from empirical data on the socio-demographic composition of innovators and 
early adopters. The differences with respect to the composition of the population 
as a whole are substantial and, so far at least, have converged only slowly. 

On the basis of recent milieu studies conducted in Germany,^ ^ potential 

acceptance of multimedia in the various milieus is likely to be as follows (Figure 2.9). 



Figure 2.9: Distribution of Social Milieus in the German Population 

(Adults aged 18 and over) 



SidMaiMf 






lMta|nit to mipf 


tdlM 


7 


4.1 


y 




15 


9.1 


mAm 


mAmI 


74 


15J 


vvriiM 




73 


15J0 


Ih 




30 


in 


Ni 


T#lil 


loe 


IS.4 


WiMAiii 



Social milieus and different ac- 
ceptance of multimedia 



19 C.f., for example, G. Schulze, Die Erlebnis- 
gesellschoft, and the milieu studies conducted 
by Sinus. 

Sources 

Figure 2.8; Screen Digest, 11/95, page 250 
and calculations by the author. 



83 



•• £CC .• 



Economics of New \Ch 
K. Schrape/W, Seufert 



No fundamental and permanent 
limitations to acceptance 



^^There is no such thing as 'society' or 'the consumer'. 
Rather, all countries are characterised by a multiplicity of 
different social milieus, life-styles and target groups. 



Despite the ambivalence of the multimedia-acceptance indicators for the 
various milieus, the data permit the following broad conclusions: 

♦ the multimedia acceptance level of around 55% of adult Germans is low or 
very low (niveau, harmony and integration milieus); 

♦ a medium-level willingness to accept multimedia can be assumed for around 
15% of the adult population (self-realisation milieu); 

♦ around 30% of the population can be assumed to have a high level of poten- 
tial multimedia acceptance (entertainment milieu). 

In sum, the broadest possible potential acceptance for multimedia goods and 
services in Germany - at present and in the coming years - applies to around 45% 
of the adult population. 

In the longer term, i.e. after the turn of the century, however, there is consider- 
able evidence for a broadening of the acceptance potential. 

♦ Jor years now media utilisation and spending structures have been shifting in 
favour of electronic media. This trend will continue. 

♦ An ever increasing proportion of the population utilises a PC and other elec- 
tronic means of communication at work. IT knowledge and equipment are 
increasingly required in schools, universities and in vocational training. The 
experiences made and the skills acquired in education and working life will 
diffuse into private use. 

♦ For many children and adolescents audiovisual and interactive communica- 
tions skills are already as much a part of daily life as reading and writing. The 
multimedia and interactive qualities of video and computer games are trans- 
posed on to other application areas as a “required norm”. 

♦ The didactic advantages of multimedia communication and information 
acquisition (improved concentration, higher retention and remembrance 
values, better motivation etc.) are undisputed. 

♦ The requirements made of individuals by an increasingly complex informa- 
tion and media environment are growing incessantly. Multimedia-based 
communication may help to raise the capacity for information processing, in- 
crease the selectivity of access and processing and raise the value in terms of 
experience and entertainment. 

Taken as a whole this implies that multimedia is in complete harmony with the 
long-term trend characterising the development of modern societies: globalisa- 
tion, differentiation and individualisation. It cannot be expected, therefore, that 
fundamental and permanent limitations to acceptance will occur. On the other 
hand, the process of acceptance diffusion will follow a course that will extend 
across generations (long learning curve) and can only be influenced from the 
supply side (through price, marketing etc.) to a limited extent. 



M 



ECC .• 



An additional factor limiting the diffusion of private consumer demand for 
multimedia is the development of disposable income, in particular spending on 
media and communication. 

Prior to any prognosis, any attempt to quantify private consumer demand for 
media and communication goods and services must first grapple with the prob- 
lems of statistical definitions and data access. Agreement has not yet been 
reached on a generally accepted and thus comparable definition of a media and 
communication sector of the economy - this is true of all countries - enabling 
spending areas to be allocated accordingly. The sector and its constituent branches 
have so far not been covered in any unambiguous way by the statistics and thus 
have been “indescribable”. 

Attempts to generate comparable sets of data have only been made for sub- 
areas. For instance, the magazine Screen Digest, in its March 1996 issue, published 
the following comparative synopsis of consumer spending on audio-visual soft- 
ware (audio and video recordings, cinema-going and Pay TV) for 1994. According 
to these figures the average European spends around $70 a year on audio-visual 
software. The differences between the European countries in this respect are 
substantial (Figure 2.10). 

Figure 2.10: Consumer Spending per Head 1994 



EuHwnks of N«w ICT& 
K. Schrape/W. Seufert 



No comparable definition of a me- 
dia and communication sector of 
the economy across countries 




Particularly striking is the fact that the southern European countries are sub- 
stantially below the European average, and that this average, in turn, is 50% below 
the comparable figure for the USA. 

For Germany, the first attempt to derive as complete and consistent a statis- 
tical picture of private household spending on media and communication as 
possible was undertaken within the framework of DlW/Prognos study conducted 
on behalf of the German Ministry of Economics. According to this study media 



20 Cf. DIW, "Gesamtwirtschaftliche Position der 
Medien in Deutschland 1 981-1 992", Berlin 
1994. (Beitrage zur Strukturforschung, voL 
153.) 

Sources 

Figure 2.10: Screen Digest March 1996 



85 



■■ ECC .• 



Economics of New ICIs 

K. Schrape/W. Seyfert 



Household spending on media 
and communication 



and communications spending by private households amounted to around DM 
100 billion in 1992; by 1994 this had increased to around DM 107 billion. Figure 
2.1 1 indicates the way in which this spending is structured (figures in %). 

Figure 2.1 1: Structure of Germany Household Media and Communication Spending 

(in %) 







Iff! 






1994 






71 






47 






• Hmimmt 




25 






It 








44 






41 




i 

i 






24 






21 


• priirt tmSt 






24 






20 


CMMMkallMipNiiV 








S3 






Mikmmmk^m 


fli 






IVJ 







Long-term prognoses 



On these figures around 2/3 of media and communication expenditure is 
accounted for by the media branches. Communication spending represents only 
one third, although it is increasing faster than that spending on media. Within the 
media sub-sector, spending on software is increasing substantially faster than that 
on hardware. In relative terms spending on print media has remained constant, 
while that on electronic media has risen significantly. This process of structural 
change within media and communications spending - observed here over a very 
short period - is likely to continue in the coming years. 

On the basis of the most recent macroeconomic long-term prognoses 
(prognos world report '96), the following trends are to be expected regaring media 
and communications expenditure by private households (Figure 2.12). 



Figure 2.12: Private Household Media and Communications Expenditure 

(Germany, nominal in DM billions) 











ldMtl994. 


mi 


MUbM 


1994 


19M 


mo 


tm 


2919 




7U 


tsi 


ISIJ 


134 


221 




m 


413 


110.3 


134 


219 




m 


14D 


335 


129 


145 


* ftftwin Itid 


SOD 


42.3 


74.1 


141 


254 


- FHrt widhtlpA 


2U 


27.4 


4t4 


129 


224 




3S.D 


50.4 


t3J 


144 


244 


mi irnrnrnifmu 


104.7 


1443 


2511 


137 


234 


Wiaikmim 














1107 


3,t54 4,751 


134 


2J2 






M.(0 t*l»n 








• DM ptr Mil 


242 




543 


134 


231 



u 




ECC .• 



In the year 2000 each household will, on average, have around DM 1,000 p.a. 
(around DM 90 per month) more for media and communications at its disposal 
than in 1994. By the year 2010 this scope for additional spending on 1994 figures 
amounts to DM 3 840. It should be noted, however, that these are nominal figures, 
i.e. that they contain price increases. Moreover, these average figures must not be 
allowed to obscure the fact that the forecast scope for additional spending is 
distributed asymmetrically across household income and purchasing power 
categories. It would, for example, not be permissible to extrapolate the scope for 
financing Pay TV on the basis of these average figures. 

Even so, the fact remains that private households will enjoy a substantial addi- 
tional scope for purchasing new multimedia goods and services, without this 
necessarily exerting a deleterious effect on the demand for existing media prod- 
ucts. At the same time, this view, derived from the model simulation, of course 
needs to consider the fact that the existing media will have to compete for this 
additional spending potential in order to generate additional growth and prevent 
the loss of market shares and substitution processes. 

The forecast of media and communications spending derived from macro- 
economic variables provides a framework for a more highly differentiated extra- 
polation for turnover for the various spending items, the results of which are 
presented in aggregate form above. These prognoses are generated with the help 
of a multi-stage, iterative process. Firstly, prognoses are made of household 
endowment with multimedia appliances and connections. Market volumes and 
turnover are initially calculated at present-day prices and then converted into 
nominal figures. An analogous procedure was followed in order to extrapolate 
charges and software expenditure as a dependent variable of purchasing power 
and utilisation. It should be noted that the “early adopters” spend considerably 
more then the “majority” that follow.^i 

The prognoses for endowment trends (Figure 2.13) are used as guide-line 
variables to determine the possible areas of substitution for other spending items 
(e.g. video, audio recording media, video games, newspapers, magazines, books, 
brochures). 

Figure 2.13: Scenario 2000/2010; Household Endowment with Multimedia Appliances and 
Connections in Germany 

itH ms rm nio 

CiUi 40 43 S? i1 

SaftlN rwipii**' 23 15 34 37 

Mfftd IV raupUM 0 0 S SO 

VUm m itmrni 0 0 1 2S 

Mi h biiiPC 17 25 43 10 

K hIh cnbkMh 2 } 25 70 



EuMiofnics of Ntw Ids 
K, Schrape /W. Seufert 



Substantial additional scope for 
purchasing new multimedia goods 
and services 



Method of prognoses 



21 An example of this is the introduction of CD. In 
1984, with a household density of 0.5%, 
average CD expenditure was DM 800 p.a.; in 
1993 the household density was around 50% 
and average spending on CD DM 230. 

* Individual and joint reception 



87 



ECC .• 



Economics of Ntw lOs 
K. Schrape/W. Seyfert 



Increase in purchasing power not 
sufficient for a rapid diffusion of 
multimedia demand in all seg- 
ments of the multimedia market 



”lhe road to the multimedia information society ... 
must ... be co-financed, particularly in the start-up phase, to a 
significant extent by firms and the public sector.” 



The diffusion scenario for the private household sector for the three multi- 
media market segments can be summarised as follows (cf. Figure 2.14): 



Figure 2.14: Introduction Phases Digital Media 




On the basis of the scenario for the diffusion of private demand in Germany, 
a number of more general conclusions can be drawn that are likely to also apply 
to other countries: 

♦ Although the initial situation in the European countries varies greatly, in the 
longer term the pattern of diffusion as multimedia markets develop is likely 
to be convergent. The existing time lags will prove persistent, however. 

♦ The heterogeneity of social milieus, the importance of the elderly as a propor- 
tion of the population and the asymmetric distribution of purchasing power 
restrict the acceptance and demand potentials in the initial phase of market 
development (up to around the year 2000) to less than 50% of the population. 
An expansion of these potentials is dependent on the behaviour of the 
different generations and is contingent on favourable economic trends. 

♦ The income at the disposal of private households will continue to grow, albeit 
more slowly than in the 1980s. The increase in purchasing power is far from 
sufficient, however, to permit a rapid diffusion of multimedia demand in all 
segments of the multimedia market. It is also unlikely that spending will be 
restructured in any substantial way in favour of multimedia products and 
services. It is realistic to expect - contingent on the diffusion of the required 
technical endowment - relatively slow substitution processes within the struc- 
ture of the media and communication budget. 

♦ This implies that the road, widely considered desirable, to the multimedia 
information society cannot be taken by the private consumer sector alone, but 
must rather be co-financed, particularly in the start-up phase, to a significant 
extent by firms and the public sector. 

Acceptance by the Business and Public Sectors 

Just as in the case of private consumer demand, the problem of defining and 
delineating the relevant items of media and communications spending also 
applies to private sector firms. Uniform and comparable conventions are to be 



88 



ECC 



found neither at national not nor EU level. The differences in the various expec- 
tations and prognoses of market volumes that have been put forward are corre- 
spondingly large. 

For Germany the above-mentioned DlW/Prognos study attempted to collate 
data on media and communications spending by private sector firms and by the 
public sector as exhaustively as possible and in clear distinction to spending by 
private households.22 According to the study, media and communication spen- 
ding by the business sector was, at around DM 211 billion in 1992, around twice 
as high as that by private households. This spending was structured as follows:^^ 

♦ Data processing and office communication, at just under 27%, constitutes - 
at first sight - the largest cost factor. 

♦ This is followed in second place by spending on advertising media and direct 
advertising (25%). If, in addition, the other “below the line” advertising and 
marketing activities are included, what one might call “influential communi- 
cation” accounts, at substantially more than 30%, for the greatest proportion 
of the total. 

♦ Telecommunication costs, at 17%, are in third place. 

♦ Printed products and print communication account for just under 12%. 

♦ Expenditure on electronic information services (offline and online) represen- 
ted, in 1992, less than 1% of all communications spending. 

It is to be expected that both internal and external communication and the use 
of advertising will continue to increase. The following reasons can be put forward 
for this: 

♦ National and international competition is increasing; “performance competi- 
tion” is increasingly being supplemented by and replaced by “communications 
competition”. 

♦ There will be a further increase in the number of advertising media and forms. 
^ Supranational, national, regional and local advertising media and activities 

will become increasingly highly differentiated. 

♦ The number of products for which advertising is required will increase as 
consumption becomes increasingly individualised. 

♦ The importance of the additional utility value of products will increase and 
this additional utility value can only be mediated through communication. 

♦ The number of organisations requiring advertising will continue to rise as increas- 
ingly non-profit organisations discover the utility of advertising (publicity work). 

♦ The spectrum of advertising will continue to broaden: from sales advertising 
to public relations and sponsoring. 

♦ The acquisition and processing of information will increasingly be divorced 
from the sphere of in-house production and will be replaced by market 
activities, among which advertising will play an important role. 

♦ On top of all this comes the increased need for vocational further training, 
which intrinsically requires communication. 



Econofnks of N«« Ids 
K, Schrape/W. Seufert 



Internal and external communi- 
cation and advertising will con- 
tinue to increase 



22 Cf. DlW/Prognos, op. cit., p. 97. 

23 The structure given in the "Kommunikations- 
Monitor H" (edited by the BDW et ol.) for 1 995 
differs from that given here. The figures are not 
comparable due to the incomplete coverage of 
the BDW study, which omits, among other 
things, advertising production costs, printing 
costs, expenditure on books, newspapers and 
magazines. 



89 



ECC .• 



Economics of New Ith 
K.Schrape/W. Seufert 

Business communication expend- 
iture will grow faster than GDP 



Three factors for success of multi- 
media applications 



As a result of these trends communication expenditure by the business sector 
is expected to grow at a faster rate than GDP (Figure 2.15). Overall spending is 
expected to treble by the year 2010. 



Figure 2.15: Communication Expenditure by the Business Sector 

Germany 1992/2010 (in %) 





im 


tm 


MIfl 




17 


n 


21 


AivirtMii Mdb/tlricl —litftn 


2S 


24 


24 


Spuiirfifi mull, Iii4t iH. 


U 


IS 


17 


llUcMMriciliN 


17 


17 


17 


iwlNr/priil uannkiflM 


13 


11 


10 


tiKfriflii MiwimM Mf¥N#i ifmn/MMtp 


1 


2 


3 




4 


1 


I 


ktd im IM) hi Ml UMn 


111 


m 


m 



The spending areas recording above-average growth include: 

♦ electronic information services (offline and online) and telecommunication; 

♦ all forms of “below the line” advertising expenditure (direct marketing, spon- 
soring, events, sales promotion, PR); 

♦ data processing and office communication. 

Spending on printing and print media and the field of traditional advertising, 
on the other hand, will expand at a below-average rate. 

These prognoses are based on an extrapolation of trends characterising cur- 
rent structural change. It can be assumed that this structural change is occurring 
or will begin to occur in similar fashion in the other European countries. 

The extent to which multimedia applications will lead to intrasectoral substi- 
tution processes within the corporate communications mix depends essentially 
on three factors: 

♦ the extent to which target groups (consumers or other firms) can be reached 
by these means, i.e. on private household and corporate endowment with 
multimedia appliances and connections; 

♦ the suitability of multimedia forms of communication for given communica- 
tive aims; 

♦ thirdly, on the cost-benefit relation compared with the solutions used so far. 

Taking as a point of departure the premise that corporate acceptance and 
implementation decisions are oriented to a greater degree than in the case of pri- 
vate households to objectifiable cost-benefit relations, demand from the business 
sector will arise and gain momentum when relative prices change in favour of 
multimedia applications, whereby their utility (compared to previous solutions) 
remains constant or rises. 



90 



ECC 



If this assumption is linked to the “accessibility criterion” (i.e. the technical 
endowment restrictions), it seems likely that commercial multimedia demand 
will initially focus on offline applications (point of interest/point of sale) and 
branch-specific and interactive “business-to-business” online applications with a 
high “image utility value” and corresponding advantages in terms of quality. 

In terms of the suitability of the communicative form, the potential for substi- 
tution is greatest in the following areas: 

Mvtnisii} if P«t1/[HrKl WifiiiHiif litanrt/OdtorJyvtrttli^ 

PR, Sfwsarfiil littfitl /Clint- Aiv«ritliiR| 

Ukt ProtMliot POS/POf M d f l w i ii Syiltwi 

Priif tJ Mtlttr CMIm IdtrstKii, OHIm Dm Mt 4 i 

Mkf, fkwififtf MtfitliiM D«ti l«l liltniwtiM 

Lttttr Pttt E-mR 

In terms of the 1992 figures these areas account together for 28% of overall 
expenditure on communication. This is the ceiling for the maximum possible 
degree of intrasectoral substitution. This substitution potential will not be 
exploited all at once however, as substitution is contingent on accessibility.^^ 
Model calculations of the way in which this potential will be exploited show 
that at most 24% of the maximum potential for substitution will have been 
utilised by the year 2000. Even by the year 2010, the substitution process will 
have only covered around 55% of the theoretically possible ground. 

Data on overall public sector demand for media and communication 
goods and services is subject to even greater reservations than in the case of 
the two demand segments discussed so far. International comparisons cannot 
be conducted without resource-intensive additional research. 

A rough estimate of public sector demand for 1992 has been made for 
Germany, once again in the DlW/Prognos study cited above (Figure 2. 16). 



Figure 2. 1 6: Public Spending on Media and Communications Goods and Services - Germany 





mmrn 


% 


Mill atJi 


\M 


M 


(RRC ttdmliff 


U 


11 


CwiiiiviwHcM Hrvkti 


7J 


U 


Tflfl 


tLS 


1M 



According to these figures, German public spending on media and com- 
munication goods and services amounted to around DM 1 1.5 billion in 1992. 
This figure does not include government PR and advertising expenditure. If 
these items are included, public spending rises to around DM 15 billion. This 



Efonomks of New 1CT& 
K, Schrape/W. Seufert 



Degrees of substitution 



24 For exomple, o maximum of around 25% of 
direct marketing/advertising by post can be 
replaced by online advertising (by the year 
2000), due to the number of households that 
will have an online link-up by that date. 



91 



ECC 



EtofHHnici d Niw Ids 

K. Schrape/W. Seufert 



Best indicators: gross value added 
and the proportion of the overall 
labour force 



Misleading deficiencies in the 
studies 



is equivalent to around 7.0% of communications spending by firms and 
around 1% of overall public spending. 

The Kommunikations-Monitor puts total communications expenditure by 
government at DM 20.2 billion in 1995. 

If the ratio between public and commercial expenditure were to remain 
constant, public spending on media and communications would be expected 
to reach around DM 25 billion in the year 2000 and DM 46 billion in 2010. 

Clearly, it must be doubted whether, given the current state of German 
government finances, such rates of expenditure growth can be realised. On the 
other hand, it must also be doubted whether such a demand trend would 
suffice to bring about a fundamental improvement in the still very low density 
of media and communications technology in public sector work and training 
places. 

Growth and Employment in the Media and Communication Sector 

Indicators to Measure Sectoral Growth 

In order to quantify the effects of a change in the demand for media and com- 
munication goods on the macroeconomic importance of the sector in which 
these goods are produced, suitable indicators must first be found. The most suit- 
able for this purpose is the gross value added of the media and communication 
sector, i.e. the contribution it makes to GDP. With regard to the employment 
aspect, the proportion of the overall labour force employed in this sector is also 
of special interest. At least one of these two indicators is used in most of the 
quantitative studies dealing with the past and future development of the media 
and communication sector. It is important to note in this context that the value 
added and the employment level of a sector can increase without the relative 
macroeconomic importance of the sector necessarily increasing. In other words, 
a distinction must be made between absolute growth and disproportionably rapid 
growth with respect to the economy as a whole. 

A number of studies refrain, however, from accurately calculating the value 
added by the media and communication sector, rather drawing direct conclusions 
from the development of the markets for media and communication goods (turn- 
over) as to the increase in value added and employment. Yet these variables need 
not necessarily move in parallel. On the contrary, for a number of reasons 
domestic demand, the domestic value added of the sector in question and sectoral 
employment may move along different trajectories: 

♦ The additional demand for media and communication products can be met 

solely or partially by imports, if the international competitive position of the 

media and communication sector deteriorates in a given country. 



92 



■■ ECC .• 



♦ Changes in production processes in the media and communication sector can 
lead to a reduction in the degree of vertical integration of the sector, so that 
some of the value added is forced out into other sectors of the economy; it is 
thus possible for the direct contribution by the industry to GDP to decline 
although turnover is rising. 

♦ The media and communication sector is characterised, as are all other sectors, 
by continuous productivity growth, so that in future the same value added can 
be generated by fewer employees. 

Thus prognoses of the growth of the media and communication industry that 
fail to take account of such effects must therefore be treated with caution. 

Finally, the prognosis for sectoral growth depends not least on the delineation 
of the media and communication sector. If those areas that are in future likely to 
be affected by negative substitution effects are included, the growth results calcu- 
lated are clearly going to be lower than if these areas - examples include the print 
media or postal services - are excluded from the analysis. 

In the mid-1970s a statistical concept was developed in the USA to measure 
the contribution to GDP made by the so-called primary information sector, 
whereby under this rubric all those branches of an economy producing - in the 
widest sense of the word - information goods were to be subsumed: either 
information itself or the means to its production, processing and dissemination. 25 
This very broad definition encompassed, for example, the entire field of industrial 
electronics (e.g. measurement and metering technology, medicinal technology) 
and the field of non-technical communication (e.g. market research, legal and 
management consultancy, training). The OECD used this concept until the mid- 
1980s as a basis for international comparisons of the “information-intensity” of 
the economies of OECD countries.26 

It is extremely difficult to forecast the specific effects of the new media and 
communication technologies on the growth of such a broadly defined 
information sector. Accordingly the DlW/Prognos study for Germany mentioned 
earlier sought to estimate quantitative employment effects for a more narrowly 
defined media and communication sector. 27 The sector was defined as follows: 

♦ firms whose central field of activity is the production or distributions of mass 
media (print and electronic media) constitute the sub-sector “media”; 

♦ firms producing or distributing electronic consumer goods, office machinery 
and data processing equipment, information-technology appliances and 
photo-technical and photo-chemical products form the sub-sector “media 
and communications technology”; 

♦ firms whose activities centre on producing DP software, software services and 
telecommunications and postal services constitute the “communications 
services” sub-sector. 



EuHwnks of N«w ICTs 

K, Schrape/W^ Seyfert 



Delineation of the media and 
communication sector 



25 Cf. Porat M.U., The Information Economy, Vol. 
I and II, Stanford University, Ph. D. 1976. 

26 OECD/iCCP (Ed.), Information Activities, Elec- 
tronics and Telecommunications Technologies. 
Impact on Employment, Growth and Trade, Vol 
l+ll,ICCPSeriesNo.6,Parisl991. 

27 Schrape, K./Seufert, W./Haas, H. et. al., Kunf- 
tige Entwicklung des Medien- und Kommuni- 
kationssektors in Deutschland. Berlin 1996. 
(Beitrdge zur Strukturforschung, vol. 162).30 
EU-Kommission, Panorama der EU-Industrie, 
Brussel 1994. 



93 



ECC .• 



Econoinks of Ntw ICfs 

K. Schrape/W. Seyfert 



Definition of "TIME branches" 



Japanese definition unclear 



28A.D. Little, Innovation und Arbeit fur dos 
Informotionszeitolter, Berlin 1996. 

29 EU-Kommission, Gemeinschaftsprogromm Info 
2000, KOM (95). 



This relatively broad definition of the M8cC sector was selected in order to take 
account of the fact that the new M&C technologies will both weld together 
previously specialised branches (consumer electronics, data technology, DP tech- 
nology, photo-technology) and will also partially dissolve the boundaries between 
mass and individual communications services. Moreover, this approach means 
that the analysis encompasses not only those branches in which the new multi- 
media markets offer a growth potential, but also those branches that are likely to 
be most severely affected by substitution effects (e.g. photochemical and postal 
services). 

The inclusion of these areas affected by substitution effects and the inclusion 
of firms specialised in the distribution of media products and media and com- 
munication technology distinguishes this definition of the media and communi- 
cation sector from that utilised in other recent studies of the future of this sector. 
This means that direct comparison of the results is not possible, although the defi- 
nitions do not differ to such an extent that no comparisons at all are admissible: 

An ADL study conducted in 1996 forecast the employment growth for the so- 
called “TIME branches” for Germany to the year 2010. The definition includes 
audiovisual and print media, telecom services and transmission technology, data- 
processing technology and data-processing services and, as a separate area, elec- 
tronics.28 

This definition is largely congruent with the definition of the so-called 
“information sector” used for many years by the EU Commission. This definition 
explicitly encompasses the field of consumer electronics. 

The CEA used a similar definition - although with rather different subdivi- 
sions - in its 1994 study of the US telecommunications industry mentioned 
above. The definition distinguishes between “conduit” (telecom services and tech- 
nology), “content” (audiovisual and print media) and “computer” (data- 
processing technology, software and services). 

It is unclear what definitions were used in the study by the Japanese telecom- 
munications council in 1994. On the one hand the study talks of a new multi- 
media industry, on the other employment growth is forecast for a “telecommuni- 
cations sector”, which remains unspecified. 

Expected Employment Trends in the Media and Communication Sector as a Whole 

In terms of the available data for the period 1992 to 1995 on value added and 
employment, the media and communication sector cannot be considered as one 
of the most important sectors either in the EU or in the USA. 

On the definition of the sector used in the DlW/Prognos study, in Germany 
around 1.9 million people were employed in this sector in 1992. This represented 
5.3% of total employment, a figure that was slightly lower than the sectoral value- 
added share of 6.1%. Of these employees around a quarter were employed in 



M 



•• ECC .* 



Econoinki of N«w tCTs 
K* SchrapeVW. Seufert 

audiovisual and print media firms, around 30% in the production and distribu- 
tion of media and communication technology and more than 45% in the 
telecom, postal and data-processing services (cf. Table 3.1). 

Table 3.1: The Media and Communications Sector and its Subsectors 1980 to 1992 





1980 


1917 


Wftl 

1914 


Gerawiy 

19U 


19M 


1990 


1992 


G(«nO<rtH 




33.8 


34.0 


33.3 


33.0 


314 


311 


31.3 


me tidwaliify 


40.3 


30.0 


39 ? 


40.0 


39.4 


40.5 


40.3 


CMMMduliMn »»rvktf 


ZIO 


70.0 


27.3 


77.0 


27.1 


27.4 


794 


me tifd 


100.0 


100.0 


too.o 


100.0 


100.0 


100.0 


100.0 


Pr«4ictiM 


77.1 


74.2 


77.4 


74.5 


74.7 


711 


711 


OiitrfwIlM 


m 


730 


22.4 


73.5 


25,3 


27.9 


17.9 




JVMi 


7U 


14.7 


27.4 


74.0 


27.1 


27.3 


24 .t 


me 


UA 


14.0 


25.1 


17.0 


25.7 


25.1 


24.9 


CtiMwItittoiS Mfvkti 


44.9 


47.3 


46.6 


44.2 


47.2 


47.0 


413 


me s^ctof, litd 


lOD.O 


IW.O 


100.0 


100.0 


100.0 


100.0 


100.0 


frvivetlii 


90.9 


90 .S 


91.5 


90.9 


90.0 


U .3 


18.1 


PblrlMMii 


9.1 


9.4 


1.5 


9.1 


10.0 


11.7 


11.9 


EapItyMirtii % if MAC fetal 


Mtdta 


21.1 


20.1 


77.3 


26.1 


77.2 


77.7 


26.7 


me fedweloff 


34.0 


32.1 


31.3 


30.1 


30.1 


3 U 


79.0 


CMMWMicitiMf lervkf f 


37.9 


39.6 


41.5 


42.5 


410 


41.3 


41.3 


me Mctar, tetil 


100.0 


100.0 


100.0 


100.0 


100.0 


100.0 


100.0 


Pre^KtiMi 


14.6 


134 


17.4 


16.4 


85.0 


83.1 


87.7 


Mirrihritai 


13.4 


14.6 


12.4 


13.6 


15,0 


149 


17.3 



If those employed in the trade sector, the photographic industry and postal services 
are excluded from the figures, the number employed in the sector falls to around 
1.2 million, i.e. to around 3.5% of total employment. This figure is the same as that 
calculated for the so-called telecommunications industry (conduit, content and 
computer) in the USA by the CEA study ( 1993) . It is slightly higher than the figure 
of 3.1% for the EU 15 in 1993 given by the EU Commission for the so-called 
information sector.^o Comparable figures for Japan are not known (Table 3.2). 

This relatively minor employment share stands in contradiction to the 
frequent claim that the media and communication sector has by now drawn level 
with the automobile industry in terms of economic importance. The CEA, for 
instance, postulates that the telecommunications industry accounts for a “share” 



30 EU-Kommission, Panorama der EU Industrie, 
Brussel 1994. 

Sources 

Table 3.1: Statistisches Bundesamt; DIW calcu- 
lations. 

* At current prices. 



BS 



ECC .• 



EcMomks oi Haw ICTs 

K. Schrape/W. Seufert 



Relatively minor employment 
share - comparison to automo- 
bile industry result of miscalcu- 
lation 



Patterns of employment growth 
in the US 



31 Cf.Booz, Allen & Hamilton, Zukunft Multimedia. 
Frankfurt/M. 1995. 

32 OECD (Ed.), Restructuring in Public Telecom- 
munications Operator Employment, Paris 1 995. 



Table 3.2: Media and Communications Employees 

as a % of Total Employment 





ndv 


li^ 


%m 






pnr/fkvp«iitsi 


iftC 


SwSTff 


\m 


It 


SJ 


uw/hipM m 


(«id bik pitf flLi 


Cwry 


\m 


1,3 


IS 


mnrnMum] 


lufaiBiiaiixty 


im 


Iff3 


IS 


3.1 


CUfM) 




USA 


m 


u 


3.S 



of 9 % of US GDP. In a recent study conducted by Booz, Allen and Hamilton, a 
GDP “share” of 10% was calculated for multimedia-relevant areas for Germany 
in 1994.31 However, in these and a number of other cases, the figures are the result 
of a statistically invalid comparison between sectoral turnover figures and 
national GDP, as an indicator of value added. This seriously exaggerates the 
importance of the sector. If, namely, one were to sum the turnover of all the 
sectors of the economy, in western industrialised countries the resultant figure 
would be between 2 and 2.5 times the value for GDP, as in this value-added indi- 
cator the inputs drawn from other sectors are subtracted in each case. Allowing 
for this fact, the media and communication sector accounts for around 3.5 to 4 % 
of value added in the USA, i.e. a figure broadly in line with its share of total 
employment. 

Although, on these figures, the media and communications sector was of 
roughly equal relative importance in the EU and the USA in the early 1990s, the 
rate of growth in the two regions had been very different during the 1980s. 

Between 1977 and 1992 the USA experienced strong employment growth in 
the sector as a whole, amounting to almost 50%. Against this background abso- 
lute employment in telecom services (telephone companies, mobile phone and 
cable network providers) actually declined slightly. The increase was concentrated 
in the so-called “copyright industries” (audio-visual media, print media, online 
services and software production). This sub-section of the American media and 
communications sector also recorded growing export surpluses. US producers of 
media and communications technology, on the other hand, have declined in 
importances^: increasingly, consumer electronics and telecom terminal 
appliances, in particular, but also simple data-processing hardware are being 
purchased abroad. 

In Germany, too, employment in the media and communications sector 
increased by almost 50% - in absolute terms by 0.55 million - between 1980 and 
1992. This increase is, however, largely due to the increase in the size of the 
economy as a whole resulting from unification with the former GDR. In the 
absence of unification, employment growth would have been of the order of 25%, 
i.e. substantially less than in the USA. One reason behind this is the sharp increase 
in Germany’s balance of trade deficit in media and communication goods. In 
1980 Germany actually achieved a surplus in this field of DM 2 billion; by 1992 



% 




ECC 



Table 3.3: Foreign Trade in Media and Communication Goods 1980 to 1992 

in DM billion at current prices 





im 


im 


1IM 


im 


im 


im 


im 


nm-Hii 

im 








8kii 




im«iii 






Grtsi Mrtfvt* 


45.2 


49.3 


55.9 


62.8 


71.3 


864 


104.4 


230.8 


Ei^s 


1.1 


2.0 


2.6 


3.4 


38 


4.7 


52 


290 7 


lnf«rts 


1.3 


1.4 


1.8 


2.0 


2.7 


4.2 


58 


4334 


DMMftk ivdhMHy** 


448 


48.7 


55.2 


614 


70.3 


85.9 


105.0 


234 4 


Eiftrl ilNrt (li %) 


4.0 


4.1 


4.6 


5.3 


53 


5.4 


5.0 


125.9 


hiftrt ilMrt (h %) 


3.0 


2.9 


32 


32 


39 


4.9 


5.5 


184.8 




Grtss Mtfvt* 


41.9 


40.5 


51.1 


584 


60.8 


665 


80.1 


191.2 


Ei^s 


14.9 


18.1 


22.7 


280 


29.1 


33.8 


306 


2050 


l«^s 


13.6 


16.5 


23.1 


26.6 


325 


42.9 


483 


356 0 


DMMStk ivdhUKy** 


40.5 


389 


51.4 


569 


642 


756 


97.8 


241.3 


Eififl siMit (hi %) 


35.7 


448 


44.5 


480 


478 


50.8 


382 


107.2 


slMTt (ii %) 


33.5 


42.5 


448 


46.7 


506 


56.7 


49.4 


147.5 




Gctst Mtpvt* 


44.3 


52.1 


58.1 


65.9 


78.2 


938 


119.6 


269.7 


Ei^i 


1.3 


1.7 


1.8 


2.1 


24 


2.5 


3.6 


270.3 


hiiptclt 


1.0 


1.8 


2.0 


2.3 


2.5 


3.4 


38 


364.9 


DMMStk fViflMty** 


44.1 


52.2 


583 


66.2 


78.4 


94.7 


119.8 


272.0 


Ei^ tiMrt (ki %) 


3.0 


3.2 


3.1 


3.2 


3.0 


2.7 


3.0 


100.2 


kiftrl siMrt (li %) 


2.4 


3.4 


3.5 


3.5 


3.2 


3.6 


3.2 


134.2 


MCfM^iiy 


Gross Mtfvt’ 


131.5 


141.9 


165.1 


187.0 


2103 


246 8 




231.3 


Eipwts 


11.1 


21.8 


27.1 


33.5 


352 


41.1 


39.4 


218.3 


kiforts 


15.9 


19.7 


26.9 


30.9 


378 


505 


578 


363.0 


DoMtstk tvdMty*' 


1294 


139.8 


164.9 


184.5 


212.8 


2563 


3226 


2494 


Eiport siMrt (ki %) 


137 


154 


16.4 


17.9 


168 


16.6 


13.0 


94.3 


knfifl sImto (ki %) 


12.3 


14.1 


16.3 


167 


17.8 


19.7 


179 


145.6 



the deficit had widened to DM 18.5 billion, of which DM 17.5 billion alone was 
on trade in media and communications technology. In this regard Germany can 
be taken as representative of virtually all the EU countries (Table 3.3). 

Within the framework of the DlW/Prognos study model calculations were 
conducted of the development of the German media and communication sector 
from the year 2000 to 2010. The calculations were based on past development 
trends in the German media and communication sector and the scenarios, pres- 
ented in the previous section, of the demand prospects for media and communi- 



EuHwnks of Nfiv 1CT& 

K, Schrape/W^ Seyfert 



Trade deficit in media and com- 
munication goods has widened 



Sources 

Table 3.3: Deutsche Bundesbank; Statistisches 
Bundesamt; DIW calculations. 

* Gross output of M&C production 
companies. 

** Gross output minus exports plus imports. 



97 



ECC .• 



[cQfKMnks of New ICIs 

K. Schrape/W, Seufert 



Highest growth expected in elec- 
tronic media and in communica- 
tion services 



Sources 

Table 3.4: DIW model-estimations. 



cation goods. For the prognoses it was assumed that the export shares remain 
largely constant - as they have done so since 1980 - and that import shares no 
longer increase, but rather remain at their 1992 level. Under such conditions, the 
study concluded that while the gross value added of the media and communi- 
cation sector at current prices - i.e. including the effect of price rises - will 
increase by the year 2010 by 180% to around DM 485 billion, this increase does 
not exceed that of German GDP as a whole (Table 3.4). 

Table 3.4: Value Added by the M&C Sector 2000/2010 in Germany 

DM billion in % 1992 = 100 





m2 


7000 


2010 


1992 


2000 


2010 


2000 


2010 


IWedia, lotol 


47 


75 


138 


770 


773 


787 


1596 


7957 


Pr»dtt(tioii 


41 




174 


736 


74.0 


756 


161.0 


307 4 


Distribution 


6 


f 


15 


34 


3.3 


3.1 


150.0 


750.0 


Print mosTia 


35 


57 


19 


70.1 


18.9 


184 


1486 


754 3 


Production 


30 


45 


77 


17.7 


164 


15.9 


150.0 


756.7 


Distribution 


5 


7 


17 


7.9 


75 


7.5 


140.0 


740 0 


Electronic medio 


12 


73 


50 


69 


84 


103 


191.7 


4167 


Production 


11 


71 


47 


6.3 


76 


9.7 


190.9 


477.3 


Distribution 


1 


7 


3 


0.6 


0.7 


0.6 


700.0 


300 0 


MtC tecknoio^y 


43 


M 


99 


747 


73.3 


70.4 


1488 


730.7 


Production 


78 


47 


64 


16.1 


15.3 


137 


150.0 


778.6 


Distribution 


IS 


77 


35 


86 


80 


7.7 


1467 


7333 


Communicotions services 


14 


134 


747 


483 


495 


50.9 


1619 


794.0 


Production 


174 


775 


485 


100.0 


1000 


100.0 


1580 


778.7 


Distribution 


153 


744 


435 


87.9 


887 


89.7 


159 5 


784 3 


MtC soctor. totd 


71 


31 


50 


171 


11.3 


103 


1476 


731.1 



Moreover, due to productivity growth the level of employment in the media 
and communication sector will rise to a far lesser extent than output. Overall, an 
increase of only around 10% to 2. 1 million is expected. Between 1992 and the year 
2000 employment growth is calculated to be just 5%. The ADL study conducted 
in 1996 comes to similar conclusions for the so-called TIME branches in 
Germany: growth of 2% from 1995 to 2000 and of 11% to 2010 (Table 3.5). 

Thus both projections are substantially lower than the very much more opti- 
mistic expectations for Germany and the EU widely held a few years ago. An ADL 
study conducted in 1994 considered possible employment growth “due to multi- 
media” in the media sector of almost 40% to the year 2000 (an increase of 0.75 
million employees). For the EU as a whole the same study forecast employment 
growth to the year 2000 of 3 million, i.e. of almost 60%. Even more euphoric was 



9S 




ECC . 



Table 3.5: Employment by the M&C Sector 2000/2010 in Germany 



1992 2000 2010 


1997 7000 7010 


7000 2010 


\ 000 vmploYMs 


id % 


1992 ^ 100 



Medio tatd 


5M 


m 


517 


26.7 


26.3 


24.7 


102.2 


101.6 


Pfodkction 


m 


440 


430 


22.2 


22.3 


21.0 


103.S 


103.3 


mstribvtiM 


IS 


00 


79 


45 


4.1 


3.0 


94.1 


92.9 


Print media 


411 


393 


364 


21 J 


19.9 


17.5 


94.S 


S0.0 


Eledronk Mf din 


93 


127 


151 


4.9 


6.4 


7.2 


136.6 


162.4 


M4C 


5S4 


SOS 


623 


29.0 


29.6 


29.0 


105.6 


112.5 


fr«dvcti«fl 


309 


315 


332 


16.2 


15,9 


15.9 


101.9 


107.4 


Dtitribvrwfi 


24S 


270 


291 


12.0 


13.7 


13.9 


110.2 


110.0 


CnirmuTiiicatiMf 


US 


070 


950 


44.3 


44,1 


45.5 


103.0 


112.4 


MIC stcinr, tolal 


(fOI 


1975 


2090 


100.0 


100.0 


100.0 


103.5 


109.5 


iPrndbctioii 


1571 


1425 


1720 


12.7 


02.3 


12.3 


103.0 


109.0 


Diitribftion 


330 


3S0 


370 


17.3 


17.7 


17.7 


106.1 


112.1 



a 1993 prognosis by the European Commission for the field of audio-visual 
media: from an expected doubling of market turnover to the year 2000 it was 
concluded without further ado that employment would also double.^^ 

The model calculations conducted for the USA by the CEA (1994) also arrive at 
a very large increase in employment in the telecommunications industries. Even in 
the absence of a government support programme, employment in this sector was 
to increase by 0.9 million or around 25% by 2003; with the help of the Nil initiative 
employment growth of as much as 1.9 million, around 50%, was thought likely. 

Even given the stronger growth trends in the USA, it seems unlikely that such 
a development will occur. It would require a far faster diffusion of new multi- 
media applications than seems realistic at present. Similarly, the assumption 
contained in the report by the Japanese government telecommunications council 
(1994) that firms producing multimedia products or providing related services 
will together account for 5.5% of Japanese value added by 2010 needs to be 
treated sceptically (Table 3.6). 

Table 3.6: Prognoses of Employment Trends in the Media and Communications Sector 



5ovr<c 


Do 1 ini lion of 
10(t0f 


Rtqion 


ioio ye Of 


Growth fo ibt yeof 
7000 


Growth to ihe 
year 2010 


OlW/Pregnm (95) 


MlCiKtor 


Gtffflony 


1992 




+ 10% 




TIME 


Onfmony 


1995 


+ 7% 


+ l)% 


AOl(96) 


MhowMK 


Gtnnony 


1993 


+ 40X 


- 


ADI {94} 


MndktMrior 


EU15 


1993 


i60% 


- 


CEA (94) 


Ttlnc'oniiTHinkDHoffl 


USA 


1993 


u)+2S)((»d7O03) 


- 




industry 






6) +50% (h) 7003) 


- 



Enmofnkt of Ntw 1 th 
K. Schrape/W. Seufert 



Employment increase expected for 
the US overestimated 



33 European Commission, The role of the content 
sector In the emerging information society, in; 
IMO, Luxemburg, October 1995. 

Sources 

Table 3.5: DIW model-estimations. 



99 



ECC .• 



EcMornks d New ICTs 

K. Schrape/W. Seufert 



Rapid productivity growth in hard- 
ware production 



34 Price Waterhouse, Employment in IT & T Equip- 
ment Manufacturing, o.0. 1992. 

35 Forum Information Society, Networks for People 
and their Communities - First Annual Report to 
the European Commission, Brussels June 1 996. 



Expected Employment Trends in Various Branches of the Media and 
Communications Sector 

The overall employment trend in the media and communications sector 
reflects varying trends in the different branches constituting the sector. Above- 
average employment and value-added growth - given the nature of the new 
information and communication technologies - is expected primarily in audio- 
visual media, telecommunication services and software producers. It is widely 
agreed, on the other hand, that in view of the still extremely rapid productivity 
growth in hardware production at best a slight increase in employment is likely 
there. According to estimates by Price Waterhouse, at the start of the 1990s just 
3.6 million people were employed in this area - excluding semi-conductor pro- 
duction - throughout the world.^^ 

The model calculations conducted within the framework of the DlW/Prognos 
study suggest that German value added and employment growth in the area of 
audio-visual media (television, radio, film, music, multimedia offline and online 
providers) can be expected to exceed that of the media and communication sector 
as a whole. Employment in this area is calculated to increase by around 35,000 to 
the year 2000 (35%) and by 60,000 to the year 2010 (60%). 

It must be recognised, however, that currently around four fifths of those 
employed in the production and distribution of mass media work in the printing 
and publishing fields. Yet print media employment is expected to decline by 
around 5% to the year 2000 and by almost 10% to the year 2010. This offsets 
almost totally the rise in employment in the audio-visual sub-sector. In this 
respect Germany is almost certainly representative of virtually all the western 
industrialised countries, in which the importance of the print media is still 
relatively high. 

The optimism regarding above-average value-added growth among the 
providers of telecommunications services is also confirmed for Germany by the 
DlW/Prognos study. Here, too, though, the picture is not without its shadows. 
Although value added is expected to grow by an above-average 75% to the year 
2000 and by 215% to the year 2010, it must be recognised that this growth will to 
some extent be at the expense of the postal services and that the employment level 
will initially decline markedly to the year 2000, and even in 2010 will be around 
5% below the 1992 figure. 

The reason for this is the huge productivity reserves within Deutsche Telekom, 
which intends, in the wake of privatisation in 1996, to shed around one quarter 
of its employees by the year 2000 (around 55,000). Indeed, according to calcu- 
lations conducted within the EU Information Society Forum, between 250,000 
and 300,000 jobs would have to be shed in the national telecom monopolies of the 
EU countries (Table 3.7) if they were to achieve the turnover per employee figures 
currently achieved by US telecom service companies.35 Nor will the emergence of 
new producers on the market expected following the abolition of network and 



100 



•• ECC .• 



transmission monopolies at the end of 1997 be able to absorb these job losses. 
Those countries which have always had private markets for telecom services or 
which deregulated their telecom markets in the 1980s (USA, Japan, Great Britain) 
all experienced a marked decline in employment between 1982 and 1992, one 
which has so far not been reversed. 



Table 3.7: Employment Trends in the Telecom Operator Sector 



If 




Cifliytit li tf92 

iim 


SOMilt 


GrwtirMi 


247 


w 




Oliwf EU-1S 


m 


m 


*]% 




130 


m 


m 


uu 


m 


Ml 


m 



The third area of the media and communications sector thought likely to have 
above-average growth prospects is that of data-processing, software suppliers and 
data-processing service companies. Assuming that the labour-intensive develop- 
ment procedures currently still used in software production are retained, the 
DlW/Prognos study calculates that German employment in this area will increase 
by 60,000 by the year 2000 (almost 30%) and by 120,000 or 60% by the year 2010. 
Controversy rages, however, on whether it will be possible to retain current pro- 
cedures over such a long period. The expectation has been voiced in certain quar- 
ters that this branch, too, will experience a fundamental “productivity revolution” 
through new programming techniques.^^ 

All three examples illustrate that the employment prospects of the media and 
communication sector are indeed subject to limitations, whether due to substitu- 
tion effects between old and new media and communication goods, or because 
of the comparatively large productivity reserves available in the production of 
certain media and communications products. 

The Effects on Employment in the Economy as a Whole 

Qualitative Ejfects - the Dimensions of Potential Structural Change Due to 
Multimedia Applications 

Wherever internal and external communication and the search for and pro- 
cessing of information form a central element in goods and service production, 
multimedia applications may well lead to changes in work processes, skill require- 
ments or the spatial distribution of employment. 

If one looks at the importance of the so-called “information-related occupa- 
tions” in the economy, the potential for such changes is clearly enormous. Within 
the framework of the OECD studies mentioned above into the degree to which 
western industrialised countries could be considered an “information society” in 



Etonofnks of Ntw \Ch 
K, Schrape/W. Seufert 



Telecom operator sector: producti- 
vity growth in Japan, Great Britain 
and the US 



36 OECD (Ed.), Restructuring in op. cit. 

37 See article "Zukunftssoftware", in: Wirtschafts- 
woche 29 th of June 1995. 

Sources 

Table 3.7: OECD 



101 



ECC 



Economics of New IHs 

K. $chrape/W. Seufert 



Employment in information-related 
occupations rose from 18% (in 
1950) to 51% (in 1992) -expected 
to be 55% in 2010 



38 Cf. Dostal, W.: Der Informationsbereich, in: 
Mertens, D.(Ed.): Konzepte der Arbeitsmarkt- 
und Berufsforschung. Nurnberg 1 988, p. 858 ff. 

39 Cf. Dostal, W. , Die Informatisierung der Arbeits- 
welt - Multimedia, offene ArbeitSormen und 
Telearbeit. In: Mitteilungen aus der Arbeitsmarkt- 
und Berufsforschung, No. 4/95, p. 527 ff. 

Sources 

Table 4.1: lAB 



the 1980s, a measurement concept was used that focuses on the input side of the 
production process, more precisely on the contribution made by “information 
labour” to the output of an economy The concept was based on a distinction 
between occupations according to the extent of information-related activities 
performed and on the proportion of the overall labour force working in 
information-related occupations. For Germany this quantification approach - 
which was oriented to the international classification of occupational groups - 
has been converted by the Institutfur Arbeitsmarkt- und Berufsforschung (lAB) to 
fit the occupational classification used in Germany. Based on the responses given 
in census and sample surveys (Mikrozensus) on the main activities performed at 
work, those occupations in which more than three quarters of those belonging to 
the occupational category reported that information-related activities formed the 
core activity were defined as “information-related occupations”.^^ 

If all those employed in these information -related occupations are brought 
together in an “information sector”, the following trends emerge for Germany: In 
1950 just 18% of the working population were employed in information-related 
occupations; by 1985 this figure had risen to 41% and by 1995 to 51%. Parallel to 
this trend, the proportion of the labour force working with computers or 
computer-assisted plant and machinery rose to over 40%. The lAB expects the 
rate of growth in the information sector to flatten out to the year 2010. By then 
the proportion of the labour force in information-related occupations is expected 
to have reached 55%.^9 (Table 4.1) 



Table 4.1: Information-related Occupations in Germany 1950-2010 

as a % of total employment 



1950 1970 19S5 1995 2000 2010 



AfHcvliwri 22 I 

Pr«^k>n 31 m 

S#rvk« 22 24 

ItfofiiHiliiDn 11 29 



S 3 3 

31 25 23 

23 21 21 

41 SI 53 



2 

21 

23 

SS 



The substantial proportion of employment constituted by information- 
related occupations - not only in Germany but in many other EU countries - 
provides an empirical basis for various prognoses according to which the new 
information and communication technologies could lead to millions of new jobs 
in Europe in the near future. For even if just one in five information employees 
were affected by qualitative changes within the coming decade, this would affect 
between 10 and 15 million workers throughout the EU. 

However, the term “new” jobs in this context is misleading. It suggests that 
each of these new jobs is “additional”, a net increase in employment, but this is not 
necessarily the case. These estimates pertain, in the final analysis, to the quantita- 
tive dimension of the structural change on the labour market in the wake of the 
diffusion of new information and communications technologies. And this is, 



102 



ECC 



indeed, substantial, as in the longer term each and every information -related 
occupation, i.e. more than one half of total employment is likely to be affected. 

One particularly interesting aspect of the change in information-related occu- 
pations is the increase in teleworking, which is much more feasible thanks to the 
new information technologies and the multimedia applications they support than 
in the past. A survey conducted by empirica in 1994 of the five largest EU countries 
forecast a potential of 8.7 million jobs for teleworking, 2.9 million of them in 
Germany, by the year 2000.^^ Extrapolating this figure, this would represent 10 
million employees throughout the EU, compared with the current figure of 1.3 
million teleworkers. While these are clearly “new” jobs in a qualitative sense, the 
majority of them are likely to be spatially relocated “old” activities and not a net 
increase in employment. 

Quantitative Effects - Increase in the Overall Level of Employment 

The process of structural change on the labour market, which is to be expected 
not only within the EU but in all industrialised countries, is associated with a 
number of problems. These form the subject of a Green Paper entitled “Living 
and Working in the Information Society. People First” published this year by the 
European Commission and include the greater need for life-long learning and the 
increase in the number of precarious employment relations lacking the protection 
of a written employment contract.^^ The Commission takes the view that these 
problems can, in principle, be solved; in particular it rejects any strategy that has 
the effect of slowing the pace of structural change. This view is based on the 
conviction that it is only if the new information and communication technologies 
spread rapidly throughout the economy that the overall macroeconomic impact 
on employment is positive. "^2 

To some extent the view that the new information and communication tech- 
nologies will lead not only to sectoral but also to macroeconomic employment 
growth are based on an optimistic interpretation of the theory of long growth 
cycles (so-called Kondratieff cycles). On this view information technologies are 
comparable, in terms of their potential, with the steam engine, the railway or 
electricity, i.e. with other basic innovations that in the past have led to an extended 
investment and growth cycle. Information technologies are thought likely to have 
the same effect.^^ Yet the identification of a statistical coincidence between the 
diffusion of basic innovations and growth phases tells us little about cause and 
effect. The causal chain may run in both directions: innovations stimulate econ- 
omic growth or rapid economic growth is conducive to structural change and 
thus accelerates the diffusion process of new technologies. The proponents of this 
optimistic view have so far failed to quantify the growth and employment effects 
that may be expected. Recently, however, a number of studies have attempted to 
quantify the macroeconomic employment effects of the new information and 
communications technologies. 



Etfmofnks of Ntw tCIs 
K, Schrape/W. Seufert 



Teleworking: not additional em- 
ployment 



Recent studies on macroeconomic 
employment effects 



40 Cf. Empirica GmbH, Telearbeit: Befragung von 
Entscheidungstriigem (DMS). Internationaler 
Vergleich.TELDETBerichtNr.4,Oktoberl994. 

41 Highlevel Expert Group, Building the European 
Information Society for Us All - First Reflections, 
Interim Report, January 1996. 

42 European Commission, Green Paper Living and 
Working in the Informotion Society; People 
First, COM (96) 389 final. 

43 Cf. Nefiodow, L.A., Derfunfte Kondratieff: Strat- 
egien zum Strukturwandel in Wirtschaft und 
Gesellschaft. Frankfurt/Main und Wiesbaden 
1990. 



103 



ECC 



Ecofiomks of New ICH 

K. Schrape/W. Seyfert 



Expectations of three studies 



METIER study on Europe: two 
scenarios 



44 Cf. METIER Consortium (1995), The Impact of 
Advanced Communications in European Growth 
and Trade. Final Report. Study on Behalf of the 
European Commission, o.0. 1995. 



These studies are generally based on three causal chains: 

♦ additional demand for new media and communications goods, which leads to 
the sectoral growth analysed above; 

♦ indirect demand effects in the branches upstream of the media and communi- 
cation sector, for example through investment by media and communication 
firms (so-called multiplier effects); 

♦ and - the major effect - an improvement in competitiveness in large sections 
of the economy resulting from the productivity growth derived from the 
deployment of new multimedia goods and services. 

Of the studies of sectoral growth and employment effects of new information 
and communication technologies mentioned above, three state their expectations 
as to the macroeconomic employment effects. 

♦ The study by the Japanese telecommunications council (1994): by the year 
2010 a total of 2.4 million jobs could be created in Japan by means of a multi- 
media support programme, of which around one third would be in the 
(imprecisely defined) telecommunication sector. 

♦ The ADL study for Germany ( 1 996) : although the accelerated introduction of 
media and communication goods and products from the TIME branches would 
not lead to an overall increase in employment in Germany, it would enable the 
decline in employment to be virtually halted from around the year 2000. 

♦ The CEA study for the USA (1994): The study compares two scenarios. If a 
support programme for the National Information Infrastructure were imple- 
mented around 2.2 million additional jobs could be created by the year 2003, 
around 40% of which would arise in the telecommunication industry. 

One study which attempted to quantify the growth and employment effects of 
the new information and communication technologies at the macroeconomic 
level was that by the METIER consortium, conducted in 1995 on behalf of the 
European Commission. This study also compared two scenarios. In the EU as a 
whole 6 million more jobs could be expected, according to the results of the study, 
if the pace of technological diffusion is “rapid” than if it is “slow”'^^ 

This last-mentioned study sets out the assumptions and methodology on 
which the results are based most clearly. It is therefore particularly well suited to 
illustrate the causal chains on which the hypothesis “higher competitiveness 
through multimedia applications” is based. 

♦ The “rapid diffusion scenario” assumes that as early as 2003 around 90% of all 
firms in the EU are able to utilise broadband telecommunication services with 
a transmission rate of 34 megabits/s. This means not only that the public tele- 
communication networks will have been modernised accordingly by this date, 
but also that firms have the required terminal appliances at their disposal. 
Moreover, in this scenario around 55% of all private households are able to 
utilise interactive multimedia services by the year 2010. The motor behind this 



104 



• ECC .• 



Econofnks of N«« ICh 
K, Schrape/W. Seufert 



development is seen as a sharp fall in the costs of communication in terms of 
both the hardware and transmission costs. Compared with 1995 levels the 
study assumes that the costs of communication will fall to just 10% for firms 
and to 30% for private households. 

♦ The “slow diffusion scenario” differs from the former primarily in terms of the 
speed with which the costs of communication decline: down to a fifth of their 
1995 level for firms by 2010 and to 45% for private households. The possible 
reasons given for such a development are, above all, the lack of a competitive 
framework for telecommunication suppliers and the resultant hesitancy to 
invest in consumer markets, the outcome of which is that the advantages of 
mass production are not exploited. Although the diffusion of the new infor- 
mation and communication technologies in the business sector is not seriously 
affected by this, only one third of private households make use of multi- 
media services in the year 2010 in the second scenario. 

The positive employment effects in the “rapid diffusion scenario” expected in 
the study are based on the following premises regarding the causal chains: 

♦ The multimedia applications made possible by the new information and com- 
munications technologies increase the extent to which many services (e.g. all 
business-related services, information and communication services) can be 
traded internationally and are also conducive to the globalisation of many 
goods markets. 

♦ This raises competitive pressure and thus the need to produce efficiently, 
particularly within the European Single Market. This means that the causal 
chain starts with a decline in employment. 

♦ Yet on the other hand, these productivity gains improve the international 
competitive position of the EU as a whole and thus lead to a marked increase 
in EU exports in the medium to longer term. 

♦ Export growth in turn leads to an increase in the long-term annual average 
rate of economic growth in the EU of 0.2 percentage points (from 2.4 to 
2.6%), whereby this positive effect does not make itself felt until after the turn 
of the century. Annual employment growth in the EU then increases from an 
average of 0.8% to 1.0%. 

Although to the year 2010 this implies a difference of 6 million jobs between 
the two scenarios, even given the more positive trend, EU unemployment rates are 
only expected to decline marginally (Table 4.2). 

These quantitative projects are based on estimates made by experts on the 
basis of extrapolations to sectoral or branch level of data from cost-benefit 
analyses for individual firms. The conclusions drawn are also analogous to the 
results obtained in the 1980s on the basis of the econometric studies conducted 
into the employment effects of new technologies as a whole within the framework 
of the so-called META Study in Germany.^^ These results showed that branches 
investing heavily in the new technologies could usually more than compensate for 



Premises for rapid diffusion scen- 
ario 



EU unemployment result of growth 
in labour force 



45 Cf. DIW (Ed.), Sektorole und gesamtwiitschoft- 
licfie Beschaftigungswirkungen moderner Tecfi- 
nologien. Berlin 1988. 



105 



ECC .• 



Economics of New ICfs 
K. Schrape/W. Seufert 



Negative employment effects will 
inevitably occur in all the EU coun- 
tries, positive ones depend on 
market success 



46 Erber, G./Hagemann, H.,op. cit. 

Sources 

Table 4.2: METIER-ConsortiumJ 995. 



Employment growth will only come about if the rapid exploitation 
of the potential offered by the new information and communication 
technologies actually enables EU firms to gain additional 
market shares on world markets. 



Table 4.2; Foreign Trade, Growth and Employment in the EU 

Given Slow/Rapid Diffusion of Information Technologies 





m2 


MtMrit' 

2010 


'SWw AHviIm 
fCMMril' 
2010 


Eipwli ky riw EU (Mitrits (ECU Ubm) 


1166 


2998 


2748 


lo *riM( EU CMatrwi 


730 


2143 


1794 


•IwWe 

It Mt-EU ctitiriti 


436 


1197 


954 


GOT t< Ibt EU (MritiM (ECU Mttil 


5421 


8612 


8314 


EU likMt ftru (■•«») 


154 


110 


180 


Emyltyt^ (i*«tn) 


139 


166 


160 


Utiwyltytj (■Ntn) 


15 


14 


20 



the productivity effects by generating additional export growth, and thus 
recorded a positive net employment effect. Those branches not investing heavily 
in the new technology, on the other hand, suffered a relative decline in employ- 
ment. Thus the result of the METIER Study, i.e. that a rapid diffusion of multi- 
media applications will in the longer term exert more significant positive employ- 
ment effects than slow diffusion, is not implausible, even if it is not based on a 
consistent econometric model. 

Yet it is important in this context to underline one result of the study that so 
far has been largely neglected in the public debate, but one also generated by the 
ADL Study of 1996: the negative employment effects resulting from the rational- 
isation potential offered by the new information technologies will inevitably 
occur in all the EU countries, whereas there is no guarantee that employment 
growth as a result of improved competitiveness will automatically occur. Employ- 
ment growth will only come about if the rapid exploitation of the potential 
offered by the new information and communication technologies actually enables 
EU firms to gain additional market shares on world markets. 

However, given that, as we have already seen, all the leading industrialised 
countries are currently making efforts in the same direction, a relative improve- 
ment in the competitive position of each country cannot occur for all at once. The 
only hope that remains for the new technologies to generate rapid overall econ- 
omic growth in the industrialised countries, sufficient to bring down unem- 
ployment in a lasting way, is that the core assumptions of the new growth theory 
apply, namely that knowledge is a factor of production in its own right, one with 
positive external effects, and that faster knowledge accumulation in the 
information society will have the effect of raising growth rates in all the indus- 
trialised countries. Controversy remains, however, on whether this premise 
receives empirical support from past developments.^^ 



106 



ECC 



Resume 



Econofnks of N«w tCIs 
K, Schrape/W. Seufert 



The analyses and prognoses of the growth and employment effects of multi- 

media information and communication technologies presented in this contribu- 
tion can be summarised as follows: 

♦ Hopes of higher employment and faster growth have been pinned on the EU s 
“Information Society” project. These hopes are based on the premise that it is 
only via a rapid diffusion of the new information and communication techno- 
logies and multimedia applications that positive employment effects in the EU 
will be generated, namely through the causal chain: globalisation of competi- 
tion - productivity growth - improvement in competitive position - econ- 
omic growth. 

♦ The lowest common denominator of the market and growth prognoses 
published so far is that they tend to express an expectation of rising turnover 
and growth in the field of telecommunications and multimedia. In all other 
respects they do not permit comparison. They offer little by way of hard 
evidence, particularly for a differentiated evaluation of the pace of diffusion. 

♦ On the basis of research into innovation diffusion, it is possible to identify a 
series of “constraint problems” on the demand for multimedia by the various 
demand segments (private households, firms, government). These constraint 
problems are mutually independent and their solution will take time. 
Constraints on rapid diffusion exist on both the supply and the demand side. 
The importance of the various constraints varies significantly between coun- 
tries. Examples include endowment with appliances and connections, degree 
of acceptance, media and communication expenditure, supply of media and 
competition within the sector. Further research is required given the lack of 
consistent and comparable data on the European countries with which to 
determine both the initial situation and the constraints on the diffusion of 
acceptance and demand. 

♦ The diffusion scenario calculated for Germany, by way of a case study, for private 
household demand is largely to be seen as a trend prognosis. The central finding 
is that the growing purchasing power potential at the disposal of private house- 
holds for media and communications goods and services is insufficient to 
permit a rapid diffusion of demand. Equally unlikely is a rapid restructuring of 
spending items in favour of multimedia goods and services in view of the slow- 
ness with which the “acceptance gap” is being bridged. On the basis of these 
model calculations the following rule of thumb can be given: until the year 2000 
only around one third of private households will be able to take the road towards 
the information society. Even by the year 2010 almost one third of German 
households will remain outside the gates to the world of multimedia. 

♦ Particularly in the start-up phase of multimedia development, it is therefore 
vital that additional demand comes in the form of spending by private sector 
firms and public sector institutions on media and communication goods and 



Basis of hope 



Constraints on demand 



Slow diffusion in private house- 
holds 



Business and government spen- 
ding needed in start-up phase 



107 



ECC .• 



EcQfKHnics of Ntw ICH 
K. Schrape/W. Seufert 



M&C sector cannot be considered 
a leading economic sector either 
in the EU or in the USA 



Results of model calculations 



Qualitative change for all the in- 
formation-related occupations 



services. Although the volume of communication and media expenditure by 
firms is around double that by households, and a faster rate of growth is to be 
expected here, the model calculations on the extent to which the potential for 
substituting new forms of media for older forms will be exploited suggest that 
the pace of diffusion will be limited in this demand sector, too. This applies to 
an even greater extent to the government demand sector. 

♦ It is not permissible to draw direct conclusions on the increase in value-added 
and employment in the media and communication sector from the growth of 
turnover of media and communication goods. Any correct measurement of the 
macroeconomic importance of this sector must be based on the gross value- 
added of the media and communications (M&C) sector (i.e. the sectoral vari- 
able comparable to GDP) and on employment shares. Moreover, the growth 
forecasted refers to a statistical definition of the sector that includes areas likely 
to be gradually displaced by the new goods and services. In terms of the data on 
value added and employment currently available, the M&C sector cannot be 
considered a leading economic sector either in the EU or in the USA. 

♦ Model calculations performed on the basis of the above demand prognoses 
suggest only average growth of value added in the media and communications 
sector to the years 2000 and 2010 compared with overall GDP. In terms of 
employment, too, the calculations point to an increase of just 5% (100,000) to 
the year 2000 and 10% (200,000) to the year 2010. 

These results are significantly lower than the optimistic expectations 
voiced until recently. The increase in value added and employment is expected 
to be above average in the following branches: audio-visual media, tele- 
communications services and data-processing software and services. Yet 
employment growth in these branches will be offset by the simultaneous 
decline expected in the print media and postal services. Moreover a “produc- 
tivity revolution” is expected in the field of data processing. Overall the 
sectoral employment prospects are highly ambivalent. 

♦ At the macroeconomic level the new information and communication tech- 
nologies and multimedia applications mean that virtually all the information- 
related occupations - which account for a substantial and rising proportion of 
overall employment in all the European countries - are being subject to 
pressure for qualitative change. Yet, just as is the case with telework, these are 
in most cases not new jobs, but merely existing activities that are being 
changed in spatial and/or qualitative terms. 

♦ The expectation that growth and employment effects will occur not only at the 
sectoral, but also at the macroeconomic level is based on an optimistic inter- 
pretation of the theory of long growth cycles. The central hypothesis is the 
conviction that only a rapid diffusion of the new media and communications 
technologies and multimedia applications will generate positive overall 
employment effects at the macroeconomic level. 



108 



• ECC .• 



This paper has brought together a number of arguments and model calcula- 
tions that cast doubt on the applicability of such “simple” causal attributions. 

The study conducted by the METIER consortium in 1995 on behalf of the EU 
Commission comes to the conclusion that the positive growth and employment 
effects depend decisively on a rapid pace of diffusion with respect to private 
demand, and at the same time that the negative employment effects resulting 
from the potential for substitution and rationalisation are unavoidable. This can 
only be termed a “paradox of optimism”. 

Growth theory suggests that the probability of positive effects increases the 
faster additional market shares can be gained by exploiting the potential appli- 
cations on global markets. Yet if, as is the case, all the industrialised countries are 
making efforts in the same direction, is it possible for all involved to experience a 
relative improvement? 

One way out of this dilemma would be to seek, within international institu- 
tions, to create better conditions for a win-win situation for all competitors. It is 
difficult to determine the chances of such a strategy succeeding, however. More 
promising would appear to be all those approaches that seek a more professional 
mastery of the factors and strategies for successfully overcoming the constraints 
on diffusion. 

The pace of diffusion is the result of a complex interlocking of cause-and- 
effect chains, including the framework of conditions, the conditions of develop- 
ment and supply-side strategies. Greater knowledge of these interrelationships, 
and its implementation in the form of operational concepts to accelerate the 
diffusion of demand are likely to be the decisive catalysts in enabling the hopes for 
economic and employment growth to be fulfilled. 



EuHwnia of Ntw fCTs 
K, Schrape/W. Seufert 



A "paradox of optimism" 



A better strategy: overcoming the 
constraints on diffusion 



109 



ECC 



EaMcaiks •( New ICk 
K. Schrape/W. Seufert 



ECC 



Social Perspectives Summary 
Interactivity in the Private Home 



The “various rhetorics” and complacency of the multimedia industry try to 
blind decision-makers to the variety of options in heterogeneous environments 
in the private home and are intended to provoke rash investments by easy simpli- 
fications. Thus, the communication revolution in European private homes is 
moving at a slow speed. “The European household of the future will ... be, at best, 
mid-tech as opposed to high tech environments” (Silverstone). The interactive 
scenario in the private home seems to be hyped and TV will remain essentially 
non-interactive: “Just as the average consumer can not imagine what interactivity 
might be, he or she is just as likely to find difficulty ... with the principle that televi- 
sion might no longer be a screen that you just watch” (Silverstone). 

However, Silverstone expects the TV to be at the very heart of the “screen ma- 
chine”. It “seems, on the face of things, a much more likely platform for interactive 
services than the PC” (Silverstone). Claisse argues that “the distribution of 
personal computers in European households is still well below the threshold 
above which we can consider that a technological innovation really transforms 
daily life”. He is more than cautious in his predictions and expects no “radical 
technological change” through information technologies in the private home for 
the “next twenty years”. No “ruptures” but slight trends will score the way, and they 
may even be in “perfect synergy” with actual life. Those trends, more or less unre- 
lated to the type of technology in which they emerge, are nomadism and 
cocooning, entertainment and utilitarianism, distribution and interaction, com- 
municational zap and social links and finally communication and decommuni- 
cation. Technology in this perspective may be understood as a set of “convivial 
tools” to co-evolve communication and society. 

Lange identifies eight strategic scenarios of the interactive home, but his scen- 
arios, although a mixture of social and technological trends, are far more tech- 
nology oriented: the increase in quality scenario, the selective TV-scenario, the 
CD-ROM scenario, the Internet scenario, the Web-TV scenario, the value-added 
services scenario, the home automation scenario and the virtual reality scenario. 
According to Lange those scenarios are as complementary as the trends suggested 
by Claisse, but the open competition among those strategies will yield an inte- 
grated approach to enhance the level of dedication in everyday life. 

Emerging interactive new computer cultures should first be described not as 
being “digital” but as being “different”. They are “wild” cultures, which cannot be 
understood from the logic of the old media, which even Silverstone, still referring 
to the importance of TV in everyday life, admits: “In terms of the model of 
domestication, the telephone and the television are entirely tame, and the video 



111 



ECC 



Sidil f Sunporr 

Interactivity in the Pvhrate Home 



recorder and the computer, in different degrees, are still quite wild. ... Television 
... is unlikely in the short and medium term to be transformed into anything 
more than a neo-interactive machine, offering sophisticated choices but little in 
the way of significant two-way interaction or content invention” (Silverstone). 
The realm of security and withdrawal is challenged through the idea of “dedi- 
cation” (Lange) which is close to the idea of making the “averaged” life not just 
more personal, but even wilder. The complexification and complication of life is 
related to the sensation of uncertainty. This is the basis for “the indeterminacy and 
uncertainty at the heart of consumer and media culture” (Silverstone). 

The entertainment business is neither an easy selling business anymore nor 
does it remain the market for low-involvement passivity. But the desire to enhance 
the level of activity may exceed the need to relax. Distraction and relaxation are 
not the only feelings sought in the private home. “As much as people get frustrated 
and bored from ‘reality’ outside of their home they demand more dedicated 
experiences in their personal and private life” (Lange). There could be a market 
for new types of dedicated activities, already emerging as “chat-groups” and 
“multi-user-dungeons”. With low usage among the whole population and a 
limited range of new services they do not characterise the actual interactive busi- 
ness, but they may indicate the long-term trends. 

“The entertainment industry acts as if people unanimously expect only 
distraction at home, but here will be a new market for edutainment, gaming and 
leisure work which is not at all developed yet” (Lange). Mobility in this respect is 
the open exchange of localities, which are restricted neither to work nor to leisure 
activities. De Sola Pool’s “double life of technology”, the simultaneity of connec- 
tion and separation that the telephone enabled, “can be extended to that of 
mobility and stasis (as the use of the mobile enables both freedom of movement 
as well as the ability to stay in one place while communicating with someone on 
the move)” (Silverstone). 

“Domesticity” is a “socio-technical dimension of the informatisation of 
everyday life which focuses on the specific social and cultural space of the house- 
hold” (Silverstone). The introduction of new types of interactivity in the private 
home is a way of taking advantage of new expectations and interfering with the 
balancing power of value systems. The industry which intends to shape new 
services has to consider that the consumer’s choice maybe limited by his capacity 
to cope with the change (Silverstone) . 

New communication technologies may contribute to a new sort of “moral 
economy”, the laws of the business machine may not be applicable to the realm of 
the private. This could be the reason why many people mistrust new technological 
trials in a competitive market although the technologies offered may be of some 
use to them. People are scared and rather sceptical when interpersonal relation- 
ships start to be measured in money and even smaller micropayments do not ease 
the tension (Lange). And what is affordable may not be satisfying or convenient. 



112 



•• ECC .• 



Roger Silverstone 



New Media in European Households 



“ i Ik' supposed iiisuliahle demand lt)r infurmation in the house 
hold of Kurope is a ehimera. except \or fur the liuusehuld of the pm- 
fessiunal elasses. some uf whmn will he working from home and* 
irunieallw also lor the household of the soeially disadvantaged - 
the tinempluyed the lone parent the physically disahled - 
whose dependence on an increasingly electronically mediated puh- 
lic information system for social survi\alaml their lack cjf mobility, 
suggest that domestic access is likely [o he crucial, ‘ 



The Past, the Present and the Future 


115 


Social Difference and Inequality 


116 


Interactivity 


117 


Need 


118 


Dynamics 


119 


Ownership 


119 


Perception 


120 


Mobility 


121 


Mobile Telephony 


122 


Domesticity 


123 


The Moral Economy 


124 


Household Difference 


125 


Family Change 


126 


Smart Homes 


127 


Community 


128 


Broadcasting and Narrowcasting 


128 


The Real and the Virtual 


129 


New Media and Community 


131 


Talking About the Screen Machine 


131 




Roger Saul Silverstone 



Professor of Medio Studies, School of Cultural and 
Community Studies, Director of the Graduate 
Research Centre in Culture and Communication, 
University of Sussex. 

Academic training in geography and sociology at 
Bolliol College, Oxford ond the London School of 
Economics ond Politico! Science (B.A., 1 966; M.A., 
1979; PhD, 1980). Work experience in publishing 
and in television research and production. Research 
projects for European and UK institutions on medio 
and communication technologies, e.g. The European 
Medio Technology and Everydoy Life Network 
(1 995-98). Books and articles on medio sociology, 
e.g. Communication by Design: The Politics of 
Informotion and Communication Technologies 
(Oxford 1996, joint editor with Robin Mansell). 



113 



ECC y 

Mfw Midn in Europton Homdwlds 



Roger Silverstone 


lit home timl semi your eyes ttrul eors obroml for you. H7h*n‘ViT the 
ehetrti t uf/riri ?i[iri is eumeii - timl there tieeil he tto hittHiiti hithtuttiott i v rr 

remote from soeutl eemres, he it the mitl iiir htilloou or miil-oeeitn flout of the 
wettther wtik himm, or the u e-eriished hut ofthepolm ('/wrvrr. where it muy not 
reoeh - it is possible iti slipper^- iitul in dressing for the dweller fi? tuke liis 

of the puhlie entertiiimnerit j^iven tluit ilay irt snrrv i i/ii' of the eurth. 

(Edward Bellamy Equality, 1 897) 

forty lit the next millenmm your ru^ht ond left eu ft links < eornn^s rnoy 
eonimuniettte with eoeh otha hy low orhitiny otelhtes ond hove nu -y iomputer 
p:-we- thon veui present l*( telephone won't rtny nulls ’■tininotelv. it will 

receive, ^ort. ond perhops respond to voin ineoniin}^ eolls like o well troined 
1 n^lish hutler Mosy medio will he redefined hy systems for tronsniittme ond 
reeviviny per niohsed mformotion ond entertomment. ''i fu els will honye u* 
■\ nne mo;e like museums ond plovyrounds yr hildren to o^^ emhie uieos ond 
oaolise with oeh other oil . >• the world Hie diyitol plonet will lo .k ond feel like 
ih. . M /■.» INeflioponte, Being Digitol, 1 »95, 6) 


Differences between neat predic- 
tions of social change and the 
realities of our everyday lives 


the predietion of future events i'< more diffieult toduython tt i‘i vr wos rn the 
relotivel) stotte. eustom hound hpiii ry of the post . ihe wonder is not thot older 
systems ofdmnotum should hove lusted se lony, hut thot ur should now feel it 
possible to do without them, ihe investment proyromnu: itf nutderti imiustriui 
firms, for e.xoinph\ nv/NJrr t/it f'sitiri? to he token ohout future poheies ot times 
when It IS often iinpossihle to form u rotionol i7ot of their outeome. ft is Jkif 
surprising thot mdustnolists sometimes use horely relevont slutistieof profeetions 
m oifliT to tusttfy whot is essentioUy o leap in the dork. 

(Thomas, Religion and the Decline of Magic, 1971, 791) 

When it comes to the future, technologies are easy, markets are harder and 
societies hardest of all. 

At a recent conference on the future of interactive television a group of around 
fifty academics and individuals working at the cutting edge of interactive televi- 
sion development were asked by a speaker about to present the latest Internet use 
figures in North America how many had connected to the World Wide Web the 
previous week. All but two had done so. He then asked how many of those who 
had accessed the Web believed that it would have a significant influence on their 
lives. No more than six hands were raised. How to understand this discrepancy? 
The Conference had heard from speaker after speaker that we were in the middle 
of a revolution so profound and so intense in its consequences that life would 
never be the same again. Yet here were those very same people reflecting on their 
own experience in quite different terms. Maybe revolutions only happen to 
others. But maybe, too, that when it comes to experience, that is to the realities of 
our everyday lives with our media machines and services, that we have to confront 
a more complex, dare I say a more interesting, set of circumstances, and a situ- 



114 



The screen machine - a single audio-visual terminal through 
which digital communications and information will enter and leave the 
household - is clearly technologically possible. 



ECC .• 



N«w M«dk3 in Europton Ho w ii nMi 

Roger Silverstone 

ation in which the meanings and significance of technologies both intrude into, 
and disturb, the neat predictions and simple formulations of the technologically 
defined analysis of social change. 



To grant this first level of complexity, a level of complexity unlikely to disturb 
sociologists, but one which engineers and technological soothsayers seem still to 
find quite shocking, is to begin an enquiry which should have consequences not 
just for the way in which we think about social change, but even more signifi- 
cantly, it should have consequences for the way in which we think about tech- 
nological change both in general and in the specific context of the new media. 



Two levels of complexity con- 
cerning social and technological 
change 



In this paper I want to explore some of these issues with a view to offering an 
analysis of the social life of media technology, especially in the home, which might 
lead to differently informed as well as possibly different conclusions about the 
future than those that the revolutionary theorists are currently providing. 



The Past, the Present and the Future 

Technological innovation is a dynamic process which involves the emergence 
of a social and cultural reality which can very rarely be foreseen. The telegraph and 
the telephone did not emerge fully fledged as socio-technical systems (Marvin, 
1988), any more than did radio (Williams, 1974), and their position in, and 
influence on, the household with respect to consumption and use was a matter, 
at best, of evolutionary development as individuals and families, stutteringly and 
unevenly, came to terms with a new information or communication technology, 
and in so doing added their influence to those of engineers, designers, market- 
makers and regulators participating in the public and private definition of the 
new machine or service. The path from telegraph to digital satellite may look 
straight and upward as we turn to look in the rear view mirror, but that path has 
been littered both with a succession of failed technologies as well as intermittent 
moral panics, as innovations have struggled to find their technological and social 
places. So while one quite plausible technological vision of the future, what I want 
to call the screen machine - a single audio-visual terminal through which digital 
communications and information will enter and leave the household - is clearly 
technologically possible, its acceptance and perhaps above all the form or forms 
of its acceptance, is far from clear. And its consequences for how we might 
conduct our everyday lives is murkiest of all. 

Turning to look back has, therefore, its uses. The post-ENIAC world has been 
one of exponential advance in computing power which has enabled information 
processing to be conducted at ever increasing speeds and in smaller and smaller 
machines. Speed and miniaturisation, as well as the capacity to deal with 
complexity, are familiar dimensions of the digital revolution. Less obvious, but 
just as significant, is the way in which such technologies, together with television 
as heir to radio as a broadcast medium, have advanced the centrality of the visual 



The screen machine: a single 
audio-visual terminal through 
which digital communication and 
information will enter and leave 
the household 



115 



ECC .• 



Mtw Mtio in EuropNn Householdi 

Roger Silverstone 



The double-edged character of 
technologies 



Inequalities in media technology 
ownership and use in Europe 



in twentieth century culture as much as they have enabled individual control. 
Visibility and control are entirely inter-related. They are also, like the technologies 
that enable them, double-edged. To see is also to be seeable. To control is also to 
be controllable. To reach is also to be reachable. Our desire for the first has 
conventionally outweighed our fear of the second in technological culture but our 
recognition of both has led, and will continue to lead, to occasionally crippling 
ambivalence about the social dimensions of innovation. It is similar at home, 
where social change and technological change run at different speeds with 
planned and unplanned technological obsolescence on the one hand and the life- 
cycle and generational change on the other. Indeed acceptance of the technolo- 
gically new is a function of the availability of cultural resources and competences, 
as much as it is of the availability of the technology or service, or the available 
financial resources to buy it. 

To approach the media and information culture of the European household 
is to approach, therefore, a complex and constantly changing social and cultural 
space, both in the private world of media consumption and in the relationship 
between the private and the public, as the boundaries between home and work, 
and between the personal and social, blur or become increasingly permeable. To 
say that both old and new media and information and communication tech- 
nologies are centrally involved in this process is to say nothing new. To point to 
our increasing dependence on such technologies and services, for our entertain- 
ment, for our communication with each other, and for our capacity to be in- 
formed about the world around us, is also entirely uncontentious. 

Social Difference and Inequality 

But at the same time it is important to insist on social and cultural differences 
and inequalities: to point out that telephone ownership is still skewed with respect 
to social class, especially in the UK, Spain and the former East Germany where 
ownership for those with income below £1 1,000 sterling falls below 85% and falls 
even further to below 75% in the case of the unskilled manual worker in the 
UK(Henley centre and Research International, July 1996; Social Trends, 1994); 
that television use is differentiated with respect to national culture, ranging from 
an average viewing time of under 150 minutes per day in Austria, Denmark, 
Finland, Netherlands and Sweden to over 250 in Italy, Portugal and, of course, the 
United States (1993/4 Figures, Screen Digest, February 1995), as well as with 
respect to gender and age; and that access to, and competence with, computers is 
also a function of the availability of material and symbolic resources (1993 US 
census figures show profound inequalities of PC ownership with respect to both 
class and ethnicity; and recent comparative figures in Europe, though based on a 
sample biased towards city dwellers and therefore likely to skew values upwards, 
shows that over 50% of households with incomes over £22.000 claim ownership 
of a computer, whereas the percentage falls to 20% or under in among low income 
(below £11,000) households (Research International and the Flenley Centre, July 



lie 



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1996)). These tensions and differences should, and do, affect and unsettle market 
forecasts as much as policy making. They will also affect the pace, the quality and 
the consequences of technological change. 

This is the context in which the pursuit of an analysis of the future of new 
media in the households of Europe will be undertaken. The analysis will take the 
following form. It will centre on discussion of what will be identified as a sequence 
of separate but interrelated socio-technical dimensions of the supposed communi- 
cation and information revolution. These socio-technical dimensions point to the 
hybrid nature of such change. Their identification and analysis will involve the 
recognition both that technological change has to be considered as social, as has 
already been argued, but also that social change both within and beyond the 
household has increasingly now to be considered as technological. The paper will 
conclude with an identification of possible household technological futures. 

The four socio-technical dimensions of media and information change that 
need to be identified are as follows: 

♦ Interactivity 

♦ Mobility 

♦ Domesticity 

♦ Community 

Interactivity 

Interactivity is often seen as a quality of technology. Indeed it is increasingly 
seen as the key distinguishing characteristic of the new range of technologies that 
are about to take over media space. Both the CD-ROM and the Internet are 
supposed to be sites of this new interactivity. So too, though it has been much 
more trumpeted than realised, are the opportunities for local interactivity that 
switching technology within cable and telecommunication systems are said to 
make possible. For Rafaeli (1988; Newhagen and Rafaeli, 1996) full interactivity 
only takes place when the content of a communication is itself dependent on a 
previous communication, thus indicating the essentially iterative nature of the 
interactive process. 

However this purist, technological, definition of interactivity is not the only 
one to be mobilised in the various rhetorics surrounding the new media. Inter- 
activity is also defined by the capacity of the user to intervene in the communi- 
cation process, and in this context it is used in a way which presupposes the user's 
intervention in an ongoing text or database without the obvious reciprocity of the 
human. Interactivity can also signify technologically mediated two-way 
communication. Brenda Laurel (1993) uses the metaphor of the conversation to 
indicate the possibility of real-time, transparent electronic communication 
between participants. Sender and receiver roles are interchangeable. 



Nvw Midio in lurc^nn HousttioUs 

Roger Silverstone 



Social change has now to be con- 
sidered as technological 



Reciprocity determines inter- 
activity: as communication on pre- 
vious communication 



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Mfw Mtda in Europran HouMrholds 

Roger Silverstone 



Today's forms of interactivity are 
only modest 



Levels of interactivity as an ap- 
proximation to more intimacy as 
well as control 



Not for the first time interactive technologies are 
machines and systems looking for uses. 



Indeed what interactivity is, or might be, is not just a matter of definition, or 
even of technical possibility, but of how that possibility is realised in the identifi- 
cation of potential user needs and in the creation of markets, but perhaps above 
all in actual use. Indeed it is possible to suggest that the present and predicted 
dominant operationalisation of interactivity is very much at a rather more modest 
end of things, for example in teletext or Video-on-Demand. Even the powerful 
voices behind the World Wide Web and Internet, for whom interactivity is once 
again a key marketing concept, have replaced any real notions of communicative 
mutuality by the one-to-many-to-one response of the consumer, buying, sub- 
scribing to, or just consulting information sources that increasingly are being 
packaged and sold (though the original rhetoric of relationships often remains). 
Promises, for example, of an intelligent user interface, as for example in the Daily 
Me newspaper that electronically pre-selects items expected to be of interest by the 
subscriber for daily down loading and printing, have yet to appear and of course 
have yet to be seen, apart from in certain business contexts, as being much in 
demand (Technology Foresight, 14, 1995). 

This situation has led at least two commentators (Miles and Thomas, 1995) to 
see interactivity as a continuum in which “the flow of information is to some 
extent under the control of the user” (my italics), distinguishing between minimal 
interactivity (the public address system), moderate interactivity (teletext), high 
interactivity (online databases, electronic publications, hypertexts or hyper- 
media) and higher levels of interactivity (decision support systems). The higher 
the level the more electronic communication approximates to interpersonal 
communication, and the greater the resulting intimacy and control. The appeal 
of these higher systems is seen to be obvious to those who are developing and 
promoting them: to enable the user-communicator maximum freedom both to 
express him or herself within the infrastructure as well as maximum interaction 
with those who are chosen to participate. 

What issues are raised by this characterisation and vision and how might those 
issues feed back into a consideration of the ways in which interactivity might 
emerge in practice? 

Need 

The first issue relates to the concept of need. Not for the first time interactive 
technologies are machines and systems looking for uses. The phenomenal growth 
of the Internet, estimated at round 50% annually at the present time (Carr, 1996) 
which can be argued in part as being not only a major interactive technology on 
its own account but capable of educating users into a more interactive culture 
sufficient to enable them to welcome the new TV based technologies when they 
arrive, perhaps belies this observation (Carr, 1996). Yet for the most part, even in 
North America where Internet use is at its highest (70-75% of Internet users are 
in the US (Carr, 1996)) it is possible to see that the bulk of users are still within 
the upper socio-demographic categories and that their use is increasingly being 



Hi 



ECC 



driven by the neo-interactivity of the Web rather than by participation in arguably 
genuinely interactive multi-user sites and bulletin boards. 

Ask any European consumer and PC user if they want interactivity from their 
television, and the answer is likely to be at best inconclusive (Silverstone and 
Haddon, 1996). A recent survey of UK households asked how respondents would 
spend £500, allowing the choice of only one item. 30% opted for a holiday abroad, 
18% for redecorating, 14% for new furniture, and only 1% for cable TV (with or 
without interactivity) (Henley Centre, Media Futures, 1994/5). This can be com- 
pared to a recent RSL survey for the UK Government’s Technology Foresight 
Initiative which revealed substantial disinterest across social classes in new tech- 
nologies and services. Respondents were asked which of a full list of new hardware 
items (PCs, CD-ROM Player, Lap-top, Modem, Internet Link, Mobile Phone, 
Personal organiser. Wide-screen TV, Satellite/Cable link) they were expecting to 
purchase in 1995. Over 74% across all classes said they had no intention of buying 
any of them (Technology Foresight, 14, 1995). 

Dynamics 

The second issue relates to the dynamics of interactivity itself. What does and 
might it mean in practice, and how might that change depending on the platform 
upon which it was being introduced? Though very little published research has 
been undertaken on the Internet user and on the meanings of such use, it seems 
reasonable to conjecture that much of the appeal (apart from the lack of cost for 
most institutionally based users) is the freedom both to connect and to hide in 
electronic space. To be able to do so effectively of course requires a number of 
prior conditions: access to the appropriate hardware and software; financial 
resources (as required); technical competence or literacy as well as desire. There 
is of course no doubt that the interactivity of the net is being driven, indeed 
created, in use, even if its idealisation in the anarchic communication of a wired 
society is progressively being eroded or marginalised by the forces of capital. Yet 
recent figures of ownership of PCs in Europe (currently at around 17% of house- 
holds) suggest that by the year 2000 that figure will rise to 40%, of whom only a 
small proportion - less than 5% overall - will have a modem and Internet connec- 
tion (EC/ACTS 1996). 

Ownership 

On the other hand television ownership across Europe is close to saturation 
and broadband cable will be passing a high proportion of European homes 
(EC/ACTS 1996 projected figures for 1998: 31% in France; 34% in the UK; 45% 
in Italy and Spain; 82% in Germany). Television seems, on the face of things, a 
much more likely platform for interactive services than the PC, especially given 
the capacity of cable to deliver digitally compressed video, voice and data into the 
home. Video-on-demand trials are currently underway in a number of EU 
member states (Belgium, France, Germany, Italy, the Netherlands, Norway, Spain, 



N«w JMq m Europton HousthoUs 

Roger Silverstone 



Substantial disinterest in new 
media technologies and services 



By the year 2000 still less than 5% 
of all Europeans will own a PC 
with Internet access 



Ilf 



•• ECC .* 



Mtw in brapeon Housvhoyi 
Roger Silverstone 

TV seems to be a more likely plat- 
form for interactive services than 
the PC 



But television is perceived as a 
non-interactive medium, thus de- 
manding an evolution in consu- 
mer perceptions 



While PCs provide global network 
services, television might remain 
a local interactive platform 



Sweden, Switzerland and the UK) yet its future as a commercial proposition is still 
far from certain given the costs of the infrastructure. But just as significantly it is 
possible to point to a number of cultural barriers which seem to suggest that 
television is likely to face its own difficulties as an interactive medium. The first is 
cost and the need to educate viewers, particularly in some European countries, to 
accept that television is something that will have to be paid for (ACTS/FAIR, 
1995). 

Perception 

Perhaps more significant, however, is the perception of television, as well as its 
use, as essentially a nan-interactive medium (Silverstone and Haddon, 1996). 
Without suggesting that television is in any sociological sense passive, even in its 
present guise, it is certain that the redefinition of its role in the household from 
an essentially broadcast one-to-many medium, to something that requires active 
involvement by the viewer at whatever level is likely to be a significant and at best 
an evolutionary undertaking. Just as the average consumer can not imagine what 
interactivity might be, he or she is just as likely to find difficulty both with any- 
thing beyond the simplest interface but perhaps even more with the principle that 
television might no longer be a screen that you just watch. 

On the other hand an ethnography of a recent trial of local interactive televi- 
sion conducted in Chicago (Carey, 1996) found a high degree of user satisfaction, 
citing a number of capabilities provided by interactive television that were valued 
highly. These involved greater choice of programming and greater control over it, 
the capacity to engage in limited transactions (including home shopping), the 
individualisation of content, the opportunities to play, both on screen and around 
it, and the capacity to communicate directly with the broadcaster. While this study 
seems entirely encouraging it should be pointed out that the subjects of the trial 
were all employees of the testing organisation, that they were all within a narrow 
socio-demographic group (lower middle class/upper working class in European 
terms) and that they were engaged in the local television culture in a way, and at 
a level, that arguably would be difficult to replicate in much of Europe. 

At issue, in general, is the cultural definition of new media. Interactivity can 
be related and applied in both local and global contexts, and there is a difference 
here which may well have some bearing on the technologies that are used to 
support it. Whereas global interactivity is provided currently by a PC based global 
network, and even though television could indeed be linked via cable access to the 
same network, it is likely that television will remain tied as an interactive platform 
to the local - national or regional level - for this will require less in terms of its 
redefinition and enable more in the integrated provision of entertainment as well 
as domestic services, especially on a mass basis. The costs of such provision in 
Europe remain problematic as indeed does the strength of local, community, 
identification which the Chicago interactive trial, for example, both presupposed 
and mobilised. Nevertheless in a future interactive environment it can be perfectly 



120 



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N«w kMa in Europton HoustMds 

Roger Silverstone 

well argued that there will be room for multiple providers and different plat- 
forms, especially if distinct roles and functions can be identified for each. 



Mobility 

There is nothing terribly new in the availability of portable technologies, tech- 
nologies that are in themselves, mobile. The Kodak Brownie camera was a user- 
friendly consumer product that enabled ordinary people to be released from the 
tyranny of the tripod and the photographic plate. Post-war transistors released 
radio from the socket and enabled the first occupation of public space by elec- 
tronically mediated sounds, voices, and above all music. The Sony Walkman 
involved increasing personalisation and individual control and, sound leakage 
notwithstanding, did not significantly increase public disturbance. The next 
generation of video cameras and pocket video receivers have, with differing 
degrees of success, extended that portability into the realm of the audio-visual. 

But mobility has other dimensions. And these are both material and symbolic. 
As Raymond Williams (1974) has famously noted, the availability of broadcast 
technologies as well as cheaper and more accessible forms of public transport 
between the wars enabled what he called “mobile privatisation”. This involved the 
movement of populations into suburbs where they could find individual and 
familial privacy and a space to express their own personality, while at the same 
time feel supported both by a public broadcasting system which integrated them 
into a national culture and by a physical infrastructure which enabled them easily 
to get to work or to participate in leisure activities outside the home. 

Both technologies and people were on the move, but in the case of media tech- 
nologies it was not just physical movement which was involved. What they 
enabled was, on the contrary, the mobility of sounds and then images which 
encouraged suburban folk increasingly to stay at home. This arguably contrary 
social trend towards a kind of sedentary privatisation is one that has been much 
noted. It has involved a progressive strengthening, for most people, of the 
boundary between private and public space, private and public territory and an 
increasing valuation of the former at the expense of the latter. While recent figures 
seem to suggest that Europeans still spend considerable and relatively inelastic 
amounts of leisure time outside the home {Eurostat '95, 1995; Punie, 1995), 
replacing cinema going with eating in restaurants or taking holidays, it is never- 
theless the case that it is the home which is still the more or less secure focal point 
of everyday life and whose security indeed enables us, as a consequence, to be 
mobile. 

Mobility then can be seen to be an increasingly wide ranging notion. It can 
involve movement in time as well as in space. It can involve the movement of 
images and information as well as people. It suggests and enables flexibility, the 
flexibility and freedom to organise where we work and where we play both inside 



Mobile privatisation: Moving into 
the suburbs but still feeling con- 
nected and integrated through 
media and physical infrastructure 



The mobility of sounds and 
images encourages people to stay 
at home 



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Mtw Msdn in Europton Hous«twldi 

Roger Silverstone 



Information technologies seem to 
offer liberation from imposed time 
regulations and space restrictions 



the home and outside it. That freedom, for those who can afford it and on whom 
it is not imposed, is much valued. And for those who can and do choose it, it signals 
another dimension by which they can claim increasing control of, and flexibility 
within, their social and physical environment. This desire to be released from the 
tyranny, above all, of fixed geographical space as well as, arguably, industrial time, 
provides the social encouragement and support for media and information tech- 
nologies that appear to offer such release, as well as being in turn reinforced by 
their emergence. 



Characteristics of mobility 



Mobility in all the above senses is socio -technical. It involves the mutuality of 
technical innovation and social change. It involves increasing individuation of 
media and information technologies as they become smaller, lighter and, above 
all in the case of the mobile phone, as they become integrated into yet another 
communication network which enables their users always to feel connected. And 
it involves increasing expectations of their capacity to control their own media 
and telecommunication spaces. 



Mobile Telephony 

Recent research (KPN, 1996) on the diffusion of the mobile phone across 
Europe points to a number of factors that seem to account for the variations in 
rates of adoption in different countries. These include the state of the fixed phone 
network, so that where the infrastructure is weak and (or) where there are waiting 
lists for access one can see a kind of leapfrog into mobile telephony. This is likely 
to be the case not just in the less developed countries of an expanding European 
Union but also in regions within the older countries of the Union where fixed 
telephony has been difficult to establish (for example in mountainous or under- 
populated regions). Otherwise the introduction of GSM telephony seems to have 
boosted recent demand. Beyond these relatively clear cut findings the research 
moves into more murky waters, where correlations between take-up and income 
and pricing become less clear and this lack of clarity extends even further once 
one focuses on possible cultural factors. This is understandable because mobile 
telephony is rapidly changing and research that measures diffusion on a macro- 
sociological level can hardly expect to get to grips with the more subtle distinc- 
tions of status and patterns of use which would provide a finer grain to the 
analysis. Nevertheless it is clear that there are substantial variations in the current 
use of mobile telephones across Europe with the highest number of subscribers 
currently in Finland (118 per 1000) and in the other Scandinavian countries 
(including Denmark, (97 per 1000) and Norway and Sweden (87 and 89 per 1000 
respectively), falling to under 40 per 1000 in the UK, Austria and Germany, and 
under 20 per 1000 in France, Belgium, the Netherlands and Spain. 

One finding of significance, however, is that mobile telephony still seems to be, 
in the main, a business tool - which is not say that business use does not from 
time to time become personal (Wood, 1993) . And it is clearly the possibility of the 
adoption of mobile telephony for personal and individual use which is of central 



122 



Domesticity is a socio-technical dimension of the 

ft 

informatisation of everyday life. 



ECC 



concern here. The recent history of the marketing of mobile telephony involves 
the targeting of different consumers, and in the UK at least a campaign that has 
involved a progressive move away from the business to the personal consumer. It 
has not been without its hiccups, especially when it seemed to be encouraging a 
perception of gendered vulnerability in a campaign that stressed the usefulness of 
the mobile to women who were stranded or in danger in public spaces. Yet anec- 
dotal evidence suggests that in these early phases of diffusion (and we are still in 
the early phases of diffusion) while the mobile has been adopted as a status object 
as well as a functional necessity by different and widely varying social groups 
(teenagers, ethnic minorities, criminal fraternities) it has yet to be regarded as an 
essential component of everyday life by a wider population even in those 
countries where subscriptions and ownership are at their highest. 

What implications does this analysis have for an understanding of the future 
life of mobile telephony? Ithiel de Sola Pool (1977) has noted how telephony, 
above all, exhibited a key and contradictory feature of all information technolo- 
gies. He called it the double life of technology and he was referring to the simul- 
taneity of connection and separation that the telephone enabled. The tension 
between the two can be extended to that of mobility and stasis (as the use of the 
mobile enables both freedom of movement as well as the ability to stay in one 
place while communicating with someone on the move). But it also involves 
another already familiar tension, that between control and being controlled and 
also that between reaching and being reached. We have developed a secondary 
technology, the answerphone, and a range of services to help us manage the 
intrusiveness of the fixed telephone. Indeed the experience of fixed telephony, 
arguably, is enough to sensitise many possible subscribers to the double life of 
mobile telephony, and especially to the intrusiveness of being called in impossible 
places. One can note, too, that the first question usually asked when calling to a 
mobile phone is “Where are you”, indicating perhaps both a sensitivity to location 
but also a need to know where that location is so that one can adjust expectations 
and conversation accordingly. 

If we are to make some sense of mobile telephony’s domestic future - for in 
individual use the technology involves an extension of the household into public 
space as well as an intrusion of public space into the household - then we will 
need to take its contrary significance into account, and we will also need to take 
into account the need to develop social rules for public telephony, social rules that 
will be both culturally specific, adjusting as they must to different perceptions of 
what is and what is not appropriate behaviour in public places across the different 
States of Europe. 

Domesticity 



N«w IMa m Europton HoustboUs 

Roger Silverstone 



Mobile telephony is not widely 
regarded as an essential compo- 
nent of everyday life 



Secondary technologies to handle 
the intrusive character of com- 
munication 



Domesticity is a socio-technical dimension of the informatisation of everyday 
life which focuses on the specific social and cultural space of the household. In 

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Ntw Midto in bnopton Houitholdi 

Roger Silverstone 



The household as a "moral econ- 
omy" 



Products of the cultural industry 
are being tamed in the household 



Indeterminancy and uncertainty 
comes along with the usage of 
new objects, images and mes- 
sages in the household 



that space both new and old technologies gain their specific meanings and signifi- 
cance as individuals within the household negotiate their own relationships to 
them. 

The Moral Economy 

It is useful to approach the more or less distinctive characteristics of the house- 
hold by describing it as a moral economy. This follows E.R Thompson (1971) in 
his description of the distinct economic culture of pre- industrial rural society 
confronted by the encroaching capitalist market. It also follows numerous anthro- 
pologists who have argued for a view of the domestic as a distinct social and 
cultural space in which the evaluation of individuals, objects and processes which 
form the currency of public life is transformed or transcended once the move is 
made into private space (especially, Parry and Bloch, 1989). In our private house- 
holds, depending on available material and symbolic resources, we are more or 
less free to define our own relationships to each other as well as to the objects and 
meanings that cross our threshold. 

Households can therefore be seen as both economic and cultural units within 
which household members can and do define for themselves a private, personal 
and a distinctive way of life. The materials and resources they have at their 
disposal come both from within - the inner world of family values - as well as 
being provided by the public world of commodified objects and meanings. The 
result is a dynamic transactional system in which households are actively and 
continuously engaged in a process of domestication, quite literally taming the 
otherwise and often alien or challenging products of the cultural industry, and 
making its mass produced objects and meanings their own (Miller, 1987). 

The acceptance and integration of, as well as the resistance to, new media or 
information technologies in the home is always therefore subject to the values the 
members of the household hold either collectively or on their own. And it is 
obvious that this integration is never entirely straightforward. When images, 
messages or objects cross the threshold of the household they become subject to 
values, practices that may be quite other than those that informed, or were 
intended in, their design or marketing. Herein lies the indeterminacy and uncer- 
tainty at the heart of consumer and media culture, an indeterminacy and uncer- 
tainty that bedevils all attempts at innovation, let alone prediction - both tech- 
nical and social. 

The particular characteristics of a household s moral economy will therefore 
define how both old and new media are actually used: how they are incorporated 
into the daily pattern and rituals of domestic life; how their use is structured by 
the gender and age based politics and relationships of the family at a particular 
stage in its life-cycle; how they are accommodated into a household’s sense of its 
own domesticity, to its own sense of home. Equally the kind and level of resources 
a household can call on will also affect how old and new media come to be used. 



124 



'^Ask any European consumer and PC user if they 
want interactivity from their television, and the answer 
is likely to be at best inconclusive/^ 



both in terms of the household’s spatial arrangements, in terms of its accepted 
patterns of, and conflicts over, time use, and in terms of such simple yet crucial 
factors as the number of screens, channels or information technologies available 
within the shared or shareable domestic space. 

A number of things follow from these observations. The first is that it is poss- 
ible, at least in theory, to identify a media-technological culture as a key dimen- 
sion of the moral economy of the household, a media-technological culture that 
is created by, and in turn defines, such things as who has principal access to the 
remote control, who is the first to answer the telephone when it rings, who has the 
right to a television or a video recorder in their private space, who claims econom- 
ic or social control over the use of information and communication technologies 
over whom and how successfully, who makes the principle consumption de- 
cisions and how, and so on. 

Household Dijference 

It also suggests that households can be classified from the point of view of their 
relationship to new media technologies not just through the familiar socio-demo- 
graphic categories of class, but through potentially more sensitive indicators, such 
as household composition (for example lone parent or individually occupied 
households), stage in the life-cycle (the elderly or the young no-child family), eth- 
nicity, the presence or absence of homeworking (for example in teleworking house- 
holds) or their participation in a shared public culture (for example in suburbia). 

For example the number of one person households across Europe, in which 
both the young and the elderly live, has been growing consistently. It now aver- 
ages 25%, with the fastest growth (23%) in Sweden, Norway, Denmark, Germany 
and the Netherlands where they now comprise over 30% of the total number of 
households (EC, 1996); the proportion of single parent families has now reached 
over 20% in Norway, Austria, Iceland, the United Kingdom, Denmark and 
Belgium, though these figures are much lower in the Southern States of Europe 
(EC, 1996); and the proportion of households where there is a teleworker, while 
extremely difficult to calculate is thought, at least in the UK, unlikely to be more 
than 4.6% of the total workforce (and the UK is generally believed to have one of 
the highest percentages of teleworkers, depending on how they are defined, in 
Europe) (Gillespie, Richardson and Cornford, 1995). 

It also follows that an understanding of how households, and individuals 
within households, actually use their present media will give strong clues as to 
their likely acceptance and their patterns of use of future media and this will 
increasingly be the case as media and information markets move towards, and be- 
come increasingly dependent upon, software rather than hardware, programmes 
and services rather than machines (Europeans were already spending more on 
software than hardware by 1990 (with the exception of Greece, Luxembourg, 
Portugal and Spain {Screen Digest 1992)). 



■■ £CC 



Nfw Medio in lur«^ HousthoUs 
Roger Silverstone 



The moral economy of the house- 
hold determines the usage of old 
and new media 



Households can be classified in 
their relationship to new media 
technologies by several indicators 



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Mnr Mfdn in EuTopNn Housvholdi 

Roger Silverstone 



New technologies will have to 
take into account our experiences 
with the existent 



New technologies and services, whatever their revolutionary claims, will there- 
fore have to take into account how we experience existing technologies and 
services and the quality of those present experiences. New technologies and 
services can be embraced, accepted reluctantly, or resisted either specifically or 
generically (Miles and Thomas, 1995). 



In terms of domestication, tele- 
phone and TV are entirely tame, 
VCRs and PCs are still quite wild 



Indeed research (Haddon, 1995) has suggested, notwithstanding variations 
across class and culture, that most households tend to take the telephone very 
much for granted - it becomes an almost invisible technology in the home; they 
regard their own relationship to television as essentially a non-active one; the 
video recorder is still defeating (though there is usually one, often younger, 
member of the household who is depended upon for his or her skills in program- 
ming it); and the computer, when there is one, tends to be the property of one 
member of the family who may or may not be using it intensely but rarely to 
anything like its full capacity. In terms of the model of domestication, the tele- 
phone and the television are entirely tame, and the video recorder and the com- 
puter, in different degrees, are still quite wild. Familiarity breeds, and invisibility 
signals, dependence. Dependence in turn suggests that the relationship that we 
have to our technologies is deeply engrained and essentially conservative. The 
particular character of that conservatism is defined and sustained by the moral 
economy of the household in which we live (on these findings and discussions of 
them see; Silverstone, 1994a; 1994b; 1995; Haddon and Silverstone 1993; 1995; 
1996). 



Media and communication tech- 
nologies provide security in a con- 
stantly changing environment 



Family Change 

On the other hand nothing is static. Families change through their life cycle. 
Households break up and reform. Domestic cultures respond to changes in the 
environment and to the changing experience of work. Family structure and 
household composition are also changing. The overall population is ageing. 
Long-term, structural unemployment is becoming a persistent reality and the na- 
ture of work itself, for those who still have it, is changing too. Indeed life is 
becoming, for many, increasingly uncertain and vulnerable. The experience of 
technology is itself not static, and indeed it is obvious that the technological cul- 
ture of today’s households is unrecognisable when measured against that of, say, 
the 1960s. It can be argued that this tension between stability and change, 
between security and insecurity, is to a degree managed through media, commu- 
nication and information technologies as well as being one consequence of their 
increasing significance in everyday life. The telephone conversation, the familiar 
structure of the broadcasting schedule, the capacity to watch one’s favourite films 
or programmes whenever we wish, and as often as we wish, Internet access to 
global information on demand, all can be seen, in principle, to provide some se- 
curity amidst the flux. 

So those new technologies and services that might be perceived to threaten or 
challenge the capacity to manage daily life in general and, more specifically, to 



126 



ti 



The supposed insatiable demand for information in 
the households of Europe is a chimera/' 



manage our existing technological universe, are likely to be less acceptable than 
those that offer, incrementally or functionally, the possibility of both greater 
freedom or greater control, or the possibility of doing better something we already 
do comfortably well. Since the European home is still principally a place to with- 
draw from the world of work, for men and school children if not for women, and 
since there is still little evidence that there is substantive demand for it to be any- 
thing else, the rise in teleworking notwithstanding, then it can be seen why future 
developments in information and communication technologies and services in 
the home must be principally leisure based. The supposed insatiable demand for 
information in the households of Europe is a chimera, except for the households 
of the professional classes, some of whom will be working from home and, 
ironically, also for the households of the socially disadvantaged - the unemployed 
(Haufiermann and Petrowsky;1989), the lone parent (Haddon and Silverstone, 
1995), the physically disabled - whose dependence on an increasingly electroni- 
cally mediated public information system for social survival, and their lack of 
mobility, suggest that domestic access is likely to be crucial. Otherwise the story 
must be that of the domestic pleasure dome, as satellite television distributors, 
games console and CD-ROM manufacturers as well as the tabloid press know 
very well. 

Smart Homes 

In the meantime there are other, albeit related, visions for the European home 
of the future. Primary amongst them is the Smart House. The Smart House has, 
relatively speaking, a long history, though this has been as much in the fantasies 
of futurists and industrial optimists as actually on the drawing boards or in imple- 
mentation trials of industrial players (Coutras and Lacascade, 1996). The Smart 
Home, the home of the future, involves the materialisation of a constant dream - 
that our lives at home can be made more efficient and more comfortable, and that 
our homes themselves can both be infinitely manageable and globally inter- 
connectable. Electronics, computing, telematics - and especially their conver- 
gence - are now seen as the key to a world in which the home, at the touch of a 
button, a click of a mouse, or the recognition of a voice, will create pleasure and 
safety, enable energy conservation and provide, instantly, automatically, a means 
to enhance the organisation of everyday life. This dream too is a basic and fun- 
damental one, grounded as it is on a human desire for security and control in an 
increasingly perplexing and complex world. Yet once again there is a fundamen- 
tal and so far crippling disjunction between consumer perceptions of their needs: 
to increase the efficiency of basic household tasks, to have an integrated elec- 
tronic connection between the household and the outside world and the need for 
appropriate telematic and entertainment services and what the industry still 
suffering from the lack of technical standards and lack of equivalent vision has 
been able to provide (Meyer and Schulze, 1996). 



£CC .• 



Nfw Midia in HousMdi 

Roger Silverstone 



Technologies are more likely to 
succeed if they offer more freedom 
or greater control in managing 
one's everyday life 



Smart homes: the dream of effi- 
cient and comfortable, manage- 
able and globally interconnect- 
able private spaces 



127 



•• ECC .• 



MfwMsdn in Europnn HouMiieldi 
Roger Silverstone 



Acceptance of new technologies 
relies on inherent added value 
and the ability of consumers to 
realise it and to feel capable of 
handling it 



Community and domesticity, are 
socio-technical spaces: Both have 
to be taken into account for the 
future of new media in the house- 
holds 



In the coming media and information society the household will not be a 
neutral space. Each household has its history and each its distinctive culture. Will- 
ingness to accept new technologies and services will depend not just on the design 
or functional characteristics of what is on offer, but on the consumer’s capacity 
both to recognise value and to feel capable and competent to accept it into the 
home. Once there, its meaning will change. It will or will not find its place. An 
understanding of the processes involved, their origins, their trajectory, their vari- 
ation, is a sine qua non for the future management of the information society, and 
for the future of new media in the households of Europe. 

Community 

Ideas of community hover between experience and desire. Indeed in a devel- 
oping Information Society the rhetoric of community has emerged as a key cul- 
tural and political motif. Both in the world of “real” social relations and relation- 
ships and in the virtual spaces of our media universe, as Kobena Mercer notes, 
when it comes to community, “Everyone would like to be in one, but no one is 
quite sure exactly what it is” (Mercer, 1996, 12). Underlying the use of the term is 
however a sense, as well as, often, an idealisation, of a set of shared or shareable 
values and experiences that enable communication and the sustaining of social re- 
lationships through time and, in one way or another, through space. 

I shall argue both that community must increasingly be seen, like domesticity, 
as socio-technical, and also that an understanding of community’s socio-technical 
dynamics and contradictions is also an essential precondition for making sense of 
the future of new media in the households of Europe. This is because those house- 
holds are embedded in a wider context of social and cultural relations, those 
relations are based both on face to face and on electronic (for example tele- 
phonically mediated) interaction, and the character and quality of those wider 
relations in turn feed back into, they both encourage or constrain, both decisions 
to purchase new technologies and services and the ways in which these new tech- 
nologies and services will be used. 

Broadcasting and Narrowcasting 

The contribution which the mass media have traditionally made to the crea- 
tion of community has been widely studied (Anderson, 1983; Scannell; 1989; 
Schlesinger, 1987). From the Sunday sermon to the regular television soap opera 
or news broadcast, the days, weeks and years have been punctuated by regular and 
predictable sequences of communications which have enabled those who have 
listened and watched to set a place for themselves in the world beyond their front 
door. Public service broadcasting has embodied this conjunction of time- space 
regularity and the particular claims for national community in most of the 
countries of Europe. The desire and capacity of individual households to struc- 
ture their domestic schedules in accordance with these public ones is equally well 



128 



ECC .• 



known - though it is important to note that the coincidence of daily tempora- 
lities, insofar as it does exist, depends to a significant degree on a mutual adjust- 
ment, in which broadcasters themselves have attempted to structure their own 
schedules and timetables according to what they believe are the dominant 
patterns of everyday life. 

The security of this structure can no longer be guaranteed, which is not to say 
that it is still no longer desired. Narrow-casting in whatever form, through video- 
rental, CD-ROM purchase, or more especially through the multiple choices that 
cable and satellite television offer, has potentially profound consequences for any 
broadcasting sustained national community. UK households with access to satel- 
lite or cable watch on average 30% less terrestrial television than those without 
such access {Screen Digest, August 1996). But it also has consequences for the 
possible demand for those services that might be seen either to disrupt that 
security or just as easily be seen to disrupt the capacity of individuals effectively 
to manage an increasingly complex array of electronic offerings. It also has con- 
sequences, of course, for what researchers have identified as the secondary 
textuality of media and for the role of media as a kind of lubricant of social inter- 
action in public spaces. Crudely put if we are all to watch different things at 
different times then how will the popular press be able to sustain their national 
discourse of television-based gossip, and equally significantly, what will we be able 
to share in conversations with our neighbours or our work mates? Oathe other 
hand it also has consequences, different consequences, for the capacity of the new 
media to create and sustain multiple ‘communities” amongst those sharing 
commonalities of ethnicity, sexuality or lifestyle. 

The Real and the Virtual 

This is clearly an issue which is relevant to the take-up of new technologies and 
services, and the capacity of actual or potential consumers to manage, or believe 
they can manage, this increasingly fragmenting and expanding electronic en- 
vironment. It has consequences, and obviously so, for the whole market system 
lying behind the provision of such technologies and services, who will have to 
come to terms with niche marketing in electronic space. It will also have conse- 
quences for any traditional notion of universal service. If we know that in an elec- 
tronic universe of over 100 accessible broadcast channels (and still rapidly expan- 
ding) most viewers are highly unlikely ever to watch more than 7 or 8 of them 
(Bellamy and Walker, 1996), then the question arises as to how to make sure both 
that viewers can find the 7 or 8 that are personally the most fulfilling, and even 
more importantly for the industry, how to make sure that the suppliers find the 
most effective ways of providing them. One possible solution to this is clearly a 
set-top search engine, but even if the technology can be designed to be simple and 
user-friendly enough there is no guarantee that consumers will want to do 
anything that requires more than minimal interaction, or indeed to participate in 
an unsharable electronic culture. 



MntiQ in Eurt^m 

Roger Silverstone 



Narrow-casting: video rentals, CD- 
ROM purchases, multiple choices 
in digital TV 



Consequences of fragmentation 
and diversification 



129 



•• ECC .* 



Mfw M«dn in Europton Houselioyi 
Roger Silverstone 

Consequences of electronic socia- 
bility 



Although dislocated, there are 
cultural bounds 



Capacity limits to extending our 
private networks into the elec- 
tronic space? 



But community intrudes into this complex in other consequential ways. The 
first involves the similarities or differences, as well as the compatibility or substitu- 
tability, between face-to-face and electronic interactions. Those who trumpet the 
idea of electronic community are expressing their enthusiasm for a new form of 
electronic sociability which extends not just to the existence of networks uncon- 
strained by time and space - the heirs of McLuhan s global village - but to a belief 
that as a result of computer mediated interaction (CMC) new forms of social 
relations will emerge that will have profound consequences on all aspects of our 
lives, fi*om the conduct of everyday life to the emergence of new forms of political 
action and representation. A number of points of direct relevance to the future of 
new media in the households of Europe can be made here. 

The first is that such virtual communities, despite their non-dependence on 
space, their dislocation, are nevertheless still culture bound, both in terms of 
access and accessibility, especially with respect to gender, class, ethnicity or 
regional infrastructure, as well as in terms of the speed with which such new 
forms of communication are accepted. A recent study in Japan (Aoki, 1994) 
points to the continuing importance of face to face communication in Japanese 
society, the lack of free local calls and the negative image of “unsociable home- 
bound people”, as reasons for the slow take-up of CMC in that country. Many 
other studies, and many expressed anxieties, point to the dangers of an 
information rich and information poor society, in which communities will indeed 
form around new media, but like all communities both past and present in the 
process of including some they will inevitably be excluding others. 

The second follows, and it concerns the culturally specific limits to our will- 
ingness and capacity to extend the range of our home-based networks into elec- 
tronic space or to embrace such networks as a substitute for the under- mediated 
interactions of everyday life. The growth of the Internet is evidence, or so it is 
sometimes believed, both of a high level of desire and indeed some achievement 
in this respect. Yet studies show that a substantial proportion of activity around 
multi-user sites is precisely that, activity around rather than participation in 
(Kawakami, 1993). And industrial experience has also shown how reluctant we 
appear to be to accept the electronic substitution for many (if not all) of our daily 
activities. While home banking seems to be increasingly accepted, the idea of 
home shopping and other examples of home based interaction have yet to emerge 
as serious possibilities. The balance that will be struck between the virtual and the 
real is therefore far fi*om settled. It is likely neither to be consistent nor uniform, 
and it is also likely not to reproduce the supposed enthusiasm which early market 
studies of Internet use have shown, for example in the number of “hits” commer- 
cial WWW Pages have attracted. The World Wide Web may be about relationships 
but those relationships are neither likely to replace more conventional ones 
(except in extremis), nor are they likely to be other than increasingly commercial 
(c.f Schrage, 1996). 



130 



u 



Forecasts are based on projections which take little or 
no account of social and cultural variation. 



£CC 



New Media and Community 

New media have to take their place therefore in domestic environments which 
are already linked to (or are not linked to) communities. Such household partici- 
pation in such communities is already dependant on media technologies and ser- 
vices. Both the telephone and the television have enabled them, above all, to 
connect to local or national cultures and, with varying degrees of intensity, com- 
mitment and consequence, to participate in different dimensions of community 
life. The degree to which households are already part of what they themselves 
might describe as community may well affect their desire to be involved in new 
media which offer an extension or a deepening of that involvement. It is far from 
clear, for example, how the possibilities for electronic democracy that various 
forms of interactivity are seen to enable are likely to be either a stimulus for, or 
even a consequence of, new media acquisition. Experiments in the US have not 
been replicated in Europe, and one needs to be cautious both in interpreting 
findings of such experiments as well as believing that European soil is as fertile as 
the North American seems to be. 

It is therefore important to draw attention to the variety of experiences of, as 
well as desires for, community, to the process of inclusion and exclusion that they 
both depend on and enforce, and to the profound inequalities in social and cul- 
tural circumstance that are both condition and consequence of technical change. 
It follows that these differences will shape both the scale and the speed with which 
new media will be accepted into the households of Europe. 

Talking About the Screen Machine 

We are now in a better position to assess how the social might intrude into the 
process of technical change in the households of Europe, and what the conse- 
quences for future media and information technologies and services might be. 

The first point to make is that confronted with a bewildering but increasingly 
sophisticated media technology environment, in which digitalisation is driving a 
whole range of increasingly interactive or neo -interactive services (video -on- 
demand, music-on-demand as well as home banking and Net based information 
services), households are going to enter the electronic spaces that these new media 
offer in many different ways and at different speeds. Forecasts of entertainmentled 
take-off in the consumer market between 1998 and 2000 but with major growth 
delayed until after the year 2000 (EC/ ACTS 1996, summarising a range of recent 
predictions) which may themselves be either good or indifferent guides to the 
future are based on often under-reliable figures both of current penetration and 
diffusion rates. The forecasts are inevitably based on projections from early adop- 
tion patterns which themselves take little or no account of social and cultural vari- 
ation both in purchase but more especially in use. 



New Mick in luroplQft Hcmsehdi 

Roger Silverstone 



The focus should be on the inclu- 
sions and exclusions of communi- 
ties 



Different ways and different 
speeds of media technology dif- 
fusion 



131 



•• £CC .• 



M- ■ 11^ 

nfW MiHl Rl BfOpRn imWmffi 

Roger Silvefstone 



Conflicts between the variety of 
new offerings and the available 
usage time 



Factors for mass market accep- 
tance 



TV is unlikely to be transformed 
into anything more than a neo- 
interactive screen machine 



The second point to make is that there is a tension in this process, seen macro- 
scopically, between a rapidly expanding increase in the range of both hardware, 
the delivery systems, and in software, content provision, and a recognition that the 
amount of time available to consume will not, can not, increase substantially. 
Households with cable and satellite television do not significantly increase the 
amount of time in front of the television set, except perhaps in the short term, and 
indeed the average amount spent in front of the television, at least in a number of 
countries in Europe (Austria, Belgium, France, Greece), seems to have fallen since 
1990 or remained more or less stationary (Germany, Spain, UK) {Screen Digest^ 
February 1995). It is equally important to point out that new technologies rarely 
replace existing ones, unless they serve almost identical functions (the audio CD 
and the vinyl record for example). Radio has not disappeared from the home and 
may well be about to gain a new lease of life with the enhanced quality and flexi- 
bility that software radio will provide, having already been invigorated by the 
surge in local, niche and thematic radio. On the other hand the PC, and any 
network based services that it can deliver, has to be doubly articulated into the 
household: both as a technical object which requires the application of new skills, 
and as a medium which offers access to information, images, stories and inter- 
actions in entirely novel ways. 

Forecasts of mass market penetration, therefore, disguise and distort the 
profound variations in the acceptance and use of new media technologies in the 
households of Europe. That those variations are region, class and culture based 
has already been argued, but the implications for many of the key services of such 
factors as household size and composition, the ageing of populations and what 
can be called “temporal capital” (the amount of disposable quality time that indi- 
viduals can call upon and devote to electronically mediated pursuits) need also to 
be taken into account. 

Within these households, and in addition to the varying resources that can or 
can not be mobilised behind the acquisition of new media technologies and 
services, there are also the deeply engrained habits and perceptions which inevi- 
tably will constrain the capacity to change the role and function of existing tech- 
nologies to be accounted for. This is especially the case for television, which is 
unlikely in the short and medium term to be transformed into anything more 
than a neo-interactive machine, offering sophisticated choices but little in the 
way of significant two way interaction or content intervention. The networked PC 
(with or without such tools as Java) on the other hand, both for reasons of cost 
and competence, will appear strongly in the households of professors and profes- 
sionals, where skills and information needs are high, and also in households with 
children, more widely, where parental ambitions for an educational role will be 
subsumed by the increased seductions of on-line games. But issues of control 
loom here both with respect to cost of access (especially where the bill payer is not 
the machine player) and with respect to morality (concerns over access to unsuit- 



132 



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Nfw IMq m Europfton HousttioMi 

Roger Silverstone 



able material or to unsuitable interactions, as well as anxieties around addiction). 
These may prove to be something of an inhibitor. 

The European households of the future will therefore be, at best, mid-tech as 
opposed to high-tech environments. Television will be more sophisticated than it 
is now, and computers will be, in the patterns of their use if not in their design, 
lower tech than they are now. The network PC will bring the cost of home 
personal computing right down but it will only survive if its interface is accept- 
ably user friendly, if the right content and software is available for the niche 
markets (teenagers, professionals working from home) on which it will depend, 
and if the overall infrastructure can deliver the required information at an accept- 
able speed. Cable could well provide a convergent environment both for TV 
choice and PC interactivity and it is increasingly being, however optimistically, 
seen as the ideal platform for home education (van Rijn, 1996), but its capacity to 
do so will depend on such factors as overall cost of investing in the infrastructure, 
competition from satellite, as well as domestic acceptance of precisely what cable 
can so significantly offer: an integrated media environment centring on the single 
or multiplex screen machine. Indeed given the increasing individuation in house- 
holds (Young, 1990), especially in households with adolescent children (and 
increasing numbers of post higher education returnees), the ability to offer 
distributed cable based services to a domestic multiplex must be crucial here. 

On the other hand any new technology that enables control, access and 
accessibility and above all the management of time and stress are likely to be 
widely acceptable, and once again depending on cost, this is likely to mean a 
strong future for mobile telephony, especially with number portability. The tele- 
phone is after all the last technology to become individualised. The number of 
households in Europe with more than one telephone line is still small. The conse- 
quent changes to the quality of our public space will be inevitable and increasingly 
accepted but will require the development of a new kind of etiquette - “mobi- 
liquette” - to parallel that already emerging on the Net. 

Finally new strategies will also have to be adopted to create or enhance the 
provision, particularly, of electronic information and communication facilities in 
public spaces to enable those otherwise disadvantaged to gain access to systems 
on which increasingly their well-being will depend. But it is also crucial to ensure 
that new services depending on advanced delivery systems are not introduced 
without protecting existing services for those who neither have the desire nor the 
resources to keep pace with the speed of media change. 



The European households will be 
at best mid-tech environments 



A strong future for mobile tele- 
phony 



133 



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Ntv Mtdta Id I w ppto n HnsiMdi 

Roger Silverstone 

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134 



ECC 



Gerard Claisse 



Communication and Decommunication 



“ I liis is llif hkhIcI ttf lupcraymtiumicaiion conuminicaUon ^is a 
value- and as a tool for the management of everyday life. Most 
individuals winy undergti the stress of hyper-eonimunieaiion need 
t(> disL’onneet. set up lllters and harriers heiween iheni selves and 
their envirinimenl in tjrder to heconie more selective, t>r simply U\ 
give themselves breathing space. .. I his new comm u ideation 
hygiene, these strategies of decomimmiealion nr mm-emineetion 
have usually hecii ignored by the prophets of the information 
society who are fascinated by the communicalioiial abuiidaiice 
which they proiiiise." 




Gerard Claisse 



Research Director at the French Ministry of Public 
Works, currently Deputy Director of the Loborotoire 
d'Economie des Transports at Lyon. Also Professor of 
Transport Economics and Data Anolysis Methodolo- 
gies at the Notional School of Public Works. 

Academic troining in economics at Universite de 
Lyon (PhD, 1981). Research at the Loborotoire 
d'Economie des Transports, a common research 
centre of the Notional Centre for Scientific Research, 
the Lumiere-Lyon 2 University ond the Notional 
School of Public Works. Publications ore moinly 
related to issues of technologies, communication 
and society. 



Some Main Trends 137 

From Solvency to Usefulness 1 39 

Diversification and Increased Complexity of Communication Models 142 

Nomadism and Cocooning 1 42 

Entertainment and Utilitarianism 1 43 

Distribution and Interaction 1 44 

Communicational Zap and Social Links 1 45 

Communication and Decommunication 146 



115 



•• ECC .* 



Comnumkotion oraf OtccrninMatfiM 

Girard Oatsse 



The myth of a new society 



Mythical discourse without history 



1 Bill Clinton, Al Gore, Notional Information Infra- 
structure: Agenda for Action, 1 993 

2 Martin Bangemann, Europe and the global 
information society: Recommendations for the 
European Council, 1 994 

3 Yoneji Masuda, The Information Society as Post- 
Industrial Society, World Future Society, 
Bethesda,USA,198] 



The government reports which have come out across the world on infor- 
mation superhighways or the information society announce a veritable scientific, 
technical, economic and social revolution concerning all the fields of daily life: 
work, education, health, security, dwellings, transport, leisure activities, culture... 

“Development of the Nil can help unleash an information revolution that will 
change forever the way people live, work and interact with each other”! the Ameri- 
can Gore-Clinton report says. “This revolution adds new capacities to human intel- 
ligence and changes the way we work together and the way we live together (...) The 
information society has the potential to improve the quality of life of Europe’s 
citizens, the efficiency of our social and economic organisation and to reinforce cohe- 
sion, ”2 the Bangemann report says. The globalisation process for economies would 
also appear to tally with a very consensual, even mimetic globalisation of the econ- 
omic and social stakes for new technologies in information and communication. 

All the elements are in place for the coming of a new society - a new age : the turn 
of the century, and the coming of a new millennium with an economic crisis lurk- 
ing in the background. “The final goal of computopia is the rebirth of the theologi- 
cal synergism of man and the supreme being, or if one prefers it, the ultimate life 
force (...) It aims to build an earthly, not a heavenly synergetic society of god and man 
(...) Homo sapiens who stood at the dawn of the first material civilisation at the end 
of the last glacial age, is now standing at the threshold of the second, the information 
civilisation after ten thousand years.”^ Thus ends the report of Yoneji Masuda, Direc- 
tor of JACUDI, and 1971 author of the Japanese project entitled “The Plan for 
Information Society: A National Goal toward the Year 2000.” Utopias are often stories 
of shipwreck (the Romanesque form of a crisis) on an island (the symbolic form of 
the civilisation which has to be reconstructed). The myth of the new society uses this 
same schema : the (industrial) society in full crisis will come to know a second 
Renaissance thanks to the sciences and technologies of communication. 

The many and varied official discourses and reports which prophesy the effects 
of the information society on everyday life are perfectly typical of what we could refer 
to as mythical narratives. The mythical discourse is ftindmentally a discourse which 
does not refer back much to history. What is new, and is given to it to interpret, is such 
a break with the past that history does not seem of any use in order to think about 
the future. The mythical discourse does not systematically evade criticism, for 
example, the risk of the loss of jobs linked to atomisation, or the risks of dehumani- 
sation as a result of electronic communication, but always refers to the perverse 
effects as extreme cases, marginal deviations, and only accepts criticism in homeo- 
pathic doses. However, history tells us the relations between technical change and 
economic and social change are always ambivalent. The analyses of the influences of 
these new technologies on everyday life would gain from recognising this ambiva- 
lence, in order to think out tomorrow’s communication - not in terms of a break, 
but rather in terms of the heavy trends leading to a diversification and increasing 
complexity of communication models. 



m 



"Major technological innovations 
in the field of information and communication 
technology are now behind us." 



Some Main Trends 



ECC 



CiKiirmmiuigi and Docnnimirikotiofi 
Gerard Claisse 



In recent history, two technological innovations have very considerably trans- 
formed the way people live and communicate: the television and the telephone. 
Television, first of all, has made its way into our daily lives to such an extent that 
it takes up more than half of Americans’ free time (four hours a day on average). 
The telephone is present in nearly every home and has considerably changed the 
way people communicate, even if people do not really spend all that much time 
on the phone (around 12 minutes per day per person in France). Had we been 
dealing with professional life, the personal computer might well have been added 
into this review. However, the distribution of personal computers in European 
households is still well below the threshold above which we can consider that a 
technological innovation has really transformed the daily life of the majority of 
citizens. 

We can now look forward to the numerical convergence of these three tech- 
nologies producing a revolution in daily life, as has been announced for the begin- 
ning of the coming century. Apart from the fact that the dynamics of economic 
and organisational convergence in these sectors of activity is somewhat problem- 
atic, I would like to defend the hypothesis that major technological innovations 
in the field of information and communication technology are now behind us, 
and that, through the domestic use of the telephone, the television and the PC, we 
shall discover the major areas in which new products and new services will 
develop. Only the technologies of virtual reality could lead to a radical tech- 
nological change if they created a virtual telepresence in technical and economic 
conditions acceptable to all and sundry. But these conditions are unlikely to occur 
for the next twenty years. To put it another way, this hypothesis suggests a change 
in perspective and in outlook in order to think out tomorrow s communication 
in terms of today’s principal trends rather than in terms of a complete break. 

1 . Among the principal trends, a certain number characterise the principal tech- 
nological evolutions which are already under way. The first trend is the devel- 
opment of nomadic or portable technology; the portable telephone, the laptop 
computer, cellular transmission. This trend is in perfect synergy with a second 
trend which concerns the multi-equipment of households, especially as far as 
the telephone and television are concerned: personal terminals. The third 
trend is the generalisation of networks which ensure interactivity between the 
sender and the receiver; this interactivity can be partial or total. The fourth 
trend is the development of technologies and networks which enable the 
transmission of animated images of video quality. The final trend is the 
numerisation of networks and terminals which lead to hybridisation or which 
favour the convergence of audio-visual, computer and telecommunication 
streams. 



The level of PC-ownership is 
below the threshold to transform 
the life of the majority of citizens 



Virtual telepresence acceptable 
to all and sundry is unlikely to 
occur for the next twenty years 



Five principal technological evol- 
utions 



137 



•• £CC .• 



ComfMiiiiiii amt Oacommunkotmi 
Gerard Oaisse 

Five families of information and 
communication services 



Major economic and social trends: 

- globalisation and liberalisation 

- merchandising of information 
and communication 

- precarious employment 

- process of individualisation 

- disappearance of borders be- 
tween public and private 



2. Other trends characterise information and communication services. Five 
major families of service exist and are developing constantly. There are the 
entertainment services which presently bring together traditional television 
and game consoles, and which are developing with cable or satellite television, 
and will be able to go on developing tomorrow with VoD, pay-per-view, and 
interactive games and programmes. Then come the interpersonal communi- 
cation services, including the traditional telephone, which is of course the 
archetype, but to which mobile services are being added, along with E-mail, 
and which will no doubt see the arrival of the videophone, discussion forums 
etc. in the very near future. Next are the information services, such as the 
press, indicator services, consultation services, databases. We can go on to 
transaction services such as those offered by the banks, insurance companies, 
reservation agencies, teleshopping companies, etc. Training services will be 
able to develop within the framework of distance learning, or computer- 
assisted learning. Monitoring and supervision and assistance services such as 
telesecurity, telediagnostics, telemedicine, and teleregulation will also develop. 

3. Finally, we must take into account several major economic and social trends 
which have considerable influence on the development of technology, services 
and usage. The first trend is the globalisation of economies, which is funda- 
mentally at work in the communication sector, for operators, producers, 
distributors and designers of technologies, services and information contents. 
The second trend is the liberalisation of economies which leads to ferocious 
competition among the various actors in communication, in prices, services, 
and innovation. The third trend results from the first two and is the merchan- 
dising of information and communication. The fourth trend results from the 
resistance to unemployment, or what can be referred to as the modern form 
of unemployment, i.e. the various forms of precarious employment; this 
generates new social fractures in many developed countries. The fifth trend is 
the continuation of the process of individualisation, which some refer to as the 
rise in individualism, and the development of communities which can change 
rapidly and which free themselves from traditional social groups. The final 
trend is the gradual disappearance of the borders between public space and 
private space, between professional life and private life. 

All these trends, all these evaluations are going to bring about growing 
complexity (thus uncertainty) in the models of communication of everyday life. 
This complexity comes from hybridisation, telescoping, and the crossing of a 
certain number of highly distinctive models. Before presenting a certain number 
of these models which will enable us to think about tomorrow’s communication, 
however, it is necessary to formulate some hypotheses about the future distribu- 
tion and penetration of the new technologies of communication and information 
in daily life. 



I3i 



"public authorities must pay 
considerable attention to the possible risks 
of the creation of a two-tier society. 



From Solvency to Usefulness 



•• ECC .* 



ContniunkoHac) ond [bciKnniiuikotiwi 

Gerard Clatsse 



Following on from the Bangemann report, the European Commission 
appointed a high-level expert group to analyse the social aspects of the 
information society. The first comments of this group of experts were made 
public in January 1996 within the framework of a provisional report entitled 
“Building the European information society for us all.”^ This is a praiseworthy 
objective which echoes the following questions asked in the Bangemann report: 
“The main risk lies in the creation of a two-tier society, of have and have-nots, in 
which only a part of the population has access to the new technology, is com- 
fortable using it and can fully enjoy its benefits (...) This places responsibilities on 
public authorities to establish safeguards and to ensure the cohesion of the new 
society. Fair access to the infrastructure will have to be guaranteed to all, as will 
the provision of universal service, the definition of which must evolve in line with 
the technology.” 

The objective therefore is to create a virtuous supply and demand circle, while 
letting the virtuous mechanisms of the market play their role, in order to attain 
the critical mass from which the technologies and services of the information 
society can be distributed throughout the whole society. In this perspective, 
government bodies and public authorities must pay considerable attention to the 
possible risks of the creation of a two-tier society. Whence the importance of a 
debate on the evolution of the idea of universal service. The idea of universal ser- 
vice is all the more important as it is at the very heart of public policy for the 
distribution of the telephone and television. It is very tempting to think that 
history will repeat itself in the next twenty years and that the laws of the market, 
modified by an enlarged definition of universal service, will be in a position to 
build an information society for everyone. Such a hypothesis may either be naive 
or deceitful. 

At the present moment, what is the actual spread of information and 
communication technologies in European households? Almost all of them have 
radio, television and the telephone; more than half of them have several receivers. 
For three quarters of households, the videocassette recorder has become an indis- 
pensable complement to the TV set. For other types of equipment, the rate is 
much lower, and varies a great deal from one European Union country to another. 
The penetration rates of the answering machine and the personal computer are 
approximately the same - between one fifth and one third of all households are 
equipped with them. The satellite and cable television equipment level is very 
variable : it is common in Germany, for example, and much less so in France. The 
number of subscribers to new state-of-the-art telephone services such as caller 
identification and multiplex conversations is very low. The cellular phone has not 
gained much ground in France and Germany compared with a PC with a modem 
(the Internet is still in its birth-throes in Europe). 



European initiatives: the high-level 
expert group and the Bangemann 
Report 



The objective: a virtuous supply 
and demand circle 



The risk: a two-tier society 



4 Building the European Information Society for us 
all: first reflexions, High Level Group of Experts 
on social and societal aspects of the information 
society, European Commission, January 1996. 



139 



ECC .• 



Conmiwiketlofi amt Oacommufikofiofl 
Gerard Claisse 

Threshold effects and inflection 
points 



One third of the French population 
has never had the opportunity to 
use a computer 



The stagnation of buying power 
limits the distribution of new 
products 



These new markets are obviously in full growth. If present trends continue, it 
would indeed appear that the arrival of these new technologies in households is 
for tomorrow. We often fail to point out that these trends come from the aggre- 
gate markets of both professional and household demand. We also often forget to 
underline the fact that the cycle for the distribution of an innovation is not linear, 
and that there are threshold effects and inflection points. The technological acces- 
sibility, the cultural accessibility, the solvency of households and the satisfaction 
which they get from using these technologies and services will, to a considerable 
extent, determine the threshold effects. 

1 . Cultural accessibility poses the question of competencies, apprenticeship, the 
capacity of individuals to navigate through the services offered to them. For 
example, it is very important to note that more than one third of the French 
adult population has never had the opportunity to use a computer. Further- 
more, more than one third of the people in households where there is one, 
declare that they do not know how to use it. This may be largely a question of 
generation, training and apprenticeship which we can hopefully expect to be 
overcome within the next twenty years. The apprenticeship at school and du- 
ring professional life will be powerful encouragements to cultural adaptation 
to the new technologies. The other two questions, on the other hand, raise 
numerous questions as to the distribution of communication services and 
technologies in everyday life. If we take the example of the cellular phone, it is 
clear that the apprenticeship here is relatively minimal. The questions of econ- 
omic accessibility, in other words the solvency of households and individuals, 
and the advantages got out of the use and the usefulness actually felt, will 
determine the distribution of the cellular phone. 

2. The solvency of households, in the context of an economic crisis and the stag- 
nation of buying power is a determining element in the distribution of new 
products. Other than a traditional television set and the telephone, the present 
household equipment level obviously depends heavily on income. If we 
compare the French household equipment rate of those with less than $1,500 
per month with that of the households where income is over $4,000, we can 
see considerable differences. These differences are less marked as far as the 
penetration of mass media technologies are concerned (cable television for 
example) which varies from one to two from the lowest to the highest income 
brackets. On the other hand, the differences are much more marked as far as 
the most recent technologies are concerned - the mobile phone (from one to 
three) or the most expensive - the computer (from one to four). The differ- 
ences are even greater when we consider the simultaneous presence of several 
items of equipment in the same households: i.e. those who have taken out a 
subscription to the cable network, have a cellular phone, a PC and peripheral 
telephone equipment (fax, answering machine) only represent between 1% 
and 2% of all French households - the vast majority of them belonging to the 
highest income brackets. 



140 



ECC .• 



When you have to pay your telephone bill, buy the television licence, take out 
a subscription to be cabled, get a cellular phone or a personal computer, 
connect up to a data transmission network, and furthermore, renew this 
equipment regularly, all of this adds up to a budget which will continue to be 
outside the financial possibilities of many a household or individual. Most 
households will not have the necessary level of solvency to be able to have 
everything - they will have to choose amongst the various types of equipment 
and services. Thus, rather than talk about “haves” and “have-nots”, as most 
official reports do, it would probably be better to talk about the distinction 
between the individuals or households who are “with it” and will have all the 
equipment and services, those who only have part of them, and those again 
who will only have the basic services (television and telephone). We must add 
those who have nothing at all to these three groups - even if they are few and 
far between. This new perspective enables us to consider the domestic 
penetration of new technology in a much more differentiated and precise 
manner than the information society prophets usually do. The penetration 
rate into households for each new technology will largely depend on the 
choices which are made by all those households which can only buy part of the 
equipment and services. The level of solvency of the households will also have 
repercussions on the volume of use of the equipment and services. 

3. Why bother to equip? In other words, what satisfaction, what advantages will 
households and individuals get out of these new technologies? Even if a certain 
number of households could be sufficiently solvent, their answer to this ques- 
tion will largely determine the market for new services. Here, the mechanisms 
linked to what we call the “club effect”, but also the mechanisms linked to 
mimetic behaviour in the consumer society, play an important role in the 
distribution of new technologies and new products. If we take the example of 
Minitel in France, which had total technical accessibility (the telephone 
network), high economic accessibility (the terminal was distributed free of 
charge), it is noteworthy that the rate of distribution in French households 
remains quite low - around 30%. But Minitel offers some 30,000 on-line 
services: information services, transaction services, entertainment services, 
conversational services. It can be used to manage one’s bank account, to make 
telepurchases, reserve a train or plane ticket, rent a flat, play, dialogue, consult 
data bases. In other words, the whole field of everyday life is covered by the 
services which are available. The results, other than its use as an electronic tele- 
phone directory, are that the people who have a Minitel at home only use it on 
average once a week. We must therefore admit that there has been no real 
revolution in everyday life, even if Minitel was there to simplify things for so 
many people. 

The limited distribution of Minitel comes from the question we are presently 
asking. Why bother with this type of equipment? The same will be true for the 



CiKiinninkofMfi and CbcDnvminkatiofi 

Gerard Claisse 



Single payments add up to a 
budget outside the financial pos- 
sibilities for many households 



We need to rethink the domestic 
penetration of new technology in 
a more differentiated and precise 
manner than the information 
prophets usually do 



The "club effect" 



People use Minitel only once a 
week 



141 



ECC .* 



itmtmmiim int Otcomrmmkafwi 

Gerard Claisse 



The main reason to avoid new 
technologies is not so much price 
as the lack of need and usefulness 



Communication cocoons and no- 
mads live in or move along with 
their telematic bubbles 



Single people living alone as 
"multi-communicators" 



distribution of other new information and communication technologies. 
Whence the search for the killer application, the equivalent of the free-of- 
charge electronic telephone directory, which represents 40% of the use of 
Minitel in France. But this example shows that even when the killer applica- 
tion has been found, it will not always be sufficient to generate a wide enough 
distribution of new information and communication technologies. When, 
today, we ask households or individuals about their wishes for equipment, and 
even more, their future purchasing intentions as far as new technologies are 
concerned, we can only note that most of them, over two-thirds, have no really 
specific desires or particular intentions. The most commonly evoked reason 
is not so much price as the lack of need and usefulness. It is thus interesting to 
analyse the needs of users, the social uses and the processes of getting accus- 
tomed to technological innovations if we wish to carry out a more rigorous 
projection of tomorrow’s domestic communication markets. The analysis of 
a certain number of domestic communication models will enable us to desig- 
nate some of the trends. 

Diversification and Increased Complexity 
of Communication Models 

Technological innovation and product innovation, along with the evolution of 
lifestyles, will bring along a diversification and an increased complexity of the 
models of residential communication. This diversification will show up through 
the different levels of equipment, the types of equipment and the contrasting 
types of use. This differentiation and this complexity will come from the hybri- 
disation of a certain number of contrasting models of communication in 
everyday life. 

Nomadism and Cocooning 

New technologies make the following two new types of behaviour possible : 
closing oneself up in a telematic bubble, or transporting the telematic bubble 
along with one. The first model is cocooning, the second is nomadism. In the first 
model, thanks to fixed technology, it is possible to have the world come to you: in 
the second it is possible to globetrot while remaining in constant touch with one’s 
home. These two communication models are a relatively good way of distin- 
guishing the telephone practices of active people living alone (more nomadic) 
from inactive people living alone (more cocoon-minded). Whether they be 
working or non-working, single people living alone telephone much more than 
the general population average. For many reasons, they are multi-communi- 
cators. On the other hand, the analysis of their telephone habits shows two 
contrasting communication models. For younger working single people, the tele- 
phone is a means of managing their free time, their social life, their leisure. From 
this point of view, the telephone leads to outings, meeting people and face-to-face 
communication. For non- working single people, the telephone is a way of using 



142 



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up free time, chatting, spending time with friends on questions particularly 
pertaining to their private lives. Here, the telephone is a means of remaining in 
contact with ones network of friends without leaving home.^ 

The nomadic model is compatible with modes of life for which personal 
and/or professional mobility is high. Mobile communication technologies are 
excellent tools for management, for the organisation of that mobility and the 
activities which are linked to it. Always on the move, nomadic man must remain 
in permanent potential contact with his home, his family, his friends, his relations 
and his professional relations. He must be able to be reactive, and miss no oppor- 
tunity. He must be in a position to utilise the considerable time he spends moving 
about. The sociability of the nomadic man is high, and it is mainly external, that 
is to say a sociability oriented towards outings, entertainment, relationships with 
friends. At one and the same time, he is therefore mobile, a communicator and 
someone who meets people. Mobile technology enables him to avoid useless trips, 
but also to prepare, to organise or simply to make the best of unexpected 
encounters, just like programmed meetings. The nomadic man who crosses the 
borders belongs to the global village. The services offered by the new television are 
not essential for him. 

In contrast, the cocooning model is compatible with ways of life which are 
characterised by remaining in the home. The idea is to reduce mobility as much 
as possible. Everything which favours the reduction of daily mobility is preferred. 
The cocooning model developed considerably with the distribution of television 
and the model of the Victorian family. In such a model, entertainment services 
(cable television, VoD, video games) and transaction services (teleshopping, bank, 
insurance and administrative services) are what are wanted. The cocooned man 
is an immobile nomad. Bring the world into the home - such is the logic of the 
cocooning model. Sociability can be high or low; it is preferably interior, that is to 
say centred on the home, whether it be the person s own home or that or those 
who are close to him. 

Entertainment and Utilitarianism 

Nomads and sedentary people can either be players or managers. The new 
services which are developing concern both entertainment and the management 
of everyday life. One can be interested in both, but at least to begin with, the 
choice of equipment and the uses by individuals tend to develop in one direction 
or the other. These are the masculine-dominant models. 

Entertainment and games are privileged areas for the development of commu- 
nication technology. Entertainment is the special market segment for television, 
just as games are for consoles and computers. Entertainment products and 
services will probably be the best motors for the distribution of new technology 
in the home. The monopoly of general interest television, which has little of real 
interest to show to a nevertheless captive audience, is coming to an end. Whether 



CiKwmmkatkin ond (hcornniunkiitim 

Gerard Claisse 



The nomadic man crossing the 
borders belongs to the global 
village. The services offered by the 
new television are not essential 
for him 



The cocooned man is an immobile 
nomad 



5 Gerard Claisse, Frantz Rowe, The telephone in 
question: questions on communication, in 
Computer Networks and ISDN systems, n°14, 
1987, pp. 207-219 



143 



ECC 



ComtMMiin orat Otcommunkite 

Gerard Claisse 



Entertainment products and 
services - best motors for the 
distribution of new technology in 
the home 



Three quarters of those who have 
a computer use it for games 



The entertainment model uses up 
free time. The utilitarian model 
enables constrained time to be 
managed 



The development of interactivity 
is necessary for the correct func- 
tioning of the distribution market 



the new television be specialised, cable, on demand or more or less interactive, it 
is going to find its place in this entertainment market. This does not however 
mean the death of general interest television which holds on to a considerable 
market share (60%) even in a highly cabled country like the US. Entertainment is 
also one of the best reasons for the purchase and use of home computers either 
by, or for, young people. Approximately three-quarters of those who have a 
computer in their homes use it for games - half of them play regularly, i.e. several 
times a week. On-line entertainment and games services also represent a sub- 
stantial source of revenue for the communication industry. The entertainment 
model will be quite weakly interactive and will remain essentially passive, which 
means that there are not going to be any really considerable markets available for 
the highly interactive services provided by television. 

If man is a homo ludens, he is also a homo faber. The utilitarian model quite 
well characterises the telephone habits of active men. The telephone is principally 
a tool which enables them to manage activities linked with their professional life 
and their social life in constrained time. Information services, consultation 
services, transaction services, management services, are all being distributed and 
make it easier for individuals to manage everyday life. This utilitarian model has 
principally been developed on the basis of an apprenticeship lived out in the 
professional milieu. It develops in households which have to deal with strong 
temporal constraints. The entertainment model uses up free time, the utilitarian 
model enables constrained time to be managed. It is more urgent here to connect 
to on-line services through a computer than to have 100 extra television channels. 
In the utilitarian model new technology enables work at home to develop, and can 
even favour certain types of telework. More than two-thirds of the individuals 
who have a PC at home say they use it for working or studying: Of those about 
two-thirds use it for their work or their studies at least several times a week. This 
model is more interactive than the entertainment model, but it is not principally 
conversational. 

Distribution and Interaction 

The models of distribution and interaction tally with two fundamental 
communication models. The distribution model corresponds to the traditional 
model of a sender who transmits information through a channel to a multitude 
of receivers - the mass media model. In the interaction model on the other hand, 
individuals are both senders and receivers in turn - this is the traditional model 
of interpersonal communication. The development of interactive technologies 
and services is supposed to rule out borders between these two models - we 
hypothesise that both will resist this virtual scrubbing. 

The communication sector has entered the market economy completely. This 
means that the elements of the traditional communication model are no longer 
the sender, the channel, the message and the receiver, but the producer, the 
distributor, the information goods and the consumer. The development of inter- 



144 



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The interaction model becomes richer thanks to 
new technological possibilities " 



activity between producer and consumer is necessary for the correct functioning 
of the distribution market. The interactivity which develops in the distribution 
model enables the transaction between producer, distributor and consumer to 
take place. In the distribution model, private individuals are fundamentally 
consumers of information and communication services. This trend corresponds 
to the generalisation of the mechanisms of the consumer society to the communi- 
cation sector and to all non-material production. The distribution model there- 
fore becomes more specialised and of less general interest. The distribution of 
new information products and services fundamentally depends on the solvency 
of households and the social symbolism which sets itself up around new 
consumer symbolic objects. 

The interaction model remains largely outside the market sphere - it is more 
the model for the exchange of non-market information; it is the reciprocity 
model. The private individual who communicates is both sender and receiver. 
Conversational technology and services are sought after. Interactivity is no longer 
a condition for the transaction, it is the condition for communication. The inter- 
action model becomes richer thanks to new technological possibilities which 
enable the transmission of sounds, static or moving images, and data. Apart from 
the conversational services of the traditional or cellular telephone type, which are 
the major market segments, the interaction model can come to develop in certain 
households, but in a much more limited manner, with the development of tele- 
work at home, and interactive television. The interaction model may also develop, 
to a moderate extent, with the coming of a group communication model, corre- 
sponding with the arrival of virtual communities in a constant state of change. 

Communicational Zap and Social Links 

Interpersonal communication is fundamentally a process of the sharing of 
meaning, intentions or projects among individuals. From this point of view, 
communication takes part in the socialising of individuals : it is the model for 
social links. When communication becomes communication for the sake of com- 
munication, or even when it is reduced to the exchange of signs and not of 
meaning, it becomes a simulation model which we will refer to as communi- 
cational zap. In the social link model, communication is the complex insertion 
mode for a complex individual in a complex environment. Communication is 
part of permanence and duration. Alterity and empathy are the conditions for 
communication, sharing of meaning and intentions. The Other is the object of 
every solicitude. To a certain extent, communication technologies are prostheses 
which enable us to maintain and even develop our networks of relationships, our 
social insertion, and our participation in the life of the city. In the social link 
model, individuals communicate and meet up continually; in the communica- 
tional zap model they interconnect and may meet up accidentally. 

In the communicational zap model, what is important is not who is communi- 
cating, but that communication is taking place. The individual belongs to a multi- 



ECC 



Cimmtimkofiwi and [^iKnnwnkiilk>n 

Gerard Clafsse 



More options: the interaction 
model becomes richer 



Communicational zap: communi- 
cation for the sake of communi- 
cation 



Communication technologies are 
prostheses for social links 



145 



ECC 



Commimkotion oraf Otccmvmmkolioo 

Gerard Oaisse 



The zapper or surfer on social 
relations 



Apathetic and frivolous solitude 
tends to replace empathic solici- 
tude 



Hypercommunication: "communi- 
cation gone wild" 



Relative decommunication 



6 This wording "decommunication" has been 
introduced by Pierre-Alain Mercier and Yves Tous- 
saint in Communiquer demain: nouvelles tech- 
niques de I'information etde la communication, 
ss. la dir. de P. Musso, DATAR, ed. de L'Aube, 
1995,287 p. 



tude of virtual networks or tribes. After having invaded the sphere of the communi- 
cation of objects, the ephemeral and the obsolescent are contaminating the consum- 
mation of conscience and social relations. The individual becomes a sort of zapper 
or surfer on social relations, interests, beliefs and undertakings. Social relationships 
can develop for an instant, but they rapidly become obsolete. The nomadic indi- 
vidual goes from one to the other of the new opportunities, the new communities, 
the new experiences which are offered to him, just as he would change channels. The 
generalisation of “the event”, new services doing away with old ones, the coming of 
new so-called virtual realities, all develop the communicational zap. Communication 
is no longer a question of duration, but of a moment in time. The communicational 
zap model favours anonymity, even anomie, in interpersonal relationships. Simu- 
lation develops, as the mode of a whimsical individual’s means of ludic insertion into 
a manipulable or virtual environment. The Other is no longer the object of solicitude 
(alterity). It has to be reinvented inside oneself (a process of personalisation). We 
communicate as much, if not more, with ourselves as with the Other. Apathetic and 
frivolous solitude tends to replace empathic solicitude. The communication habits 
which have developed on the French convivial telematic services are characteristic of 
this communicational zap model. 

Communication and Decommunication i 

All the preceding models are distinctive communication ones. They designate 
all the market segments for certain communication technologies and services: 
fixed terminals, conversational services and the distribution of immaterial 
consumer products. Tomorrow’s communication will be plural and come from 
the crossing of these different models. Tomorrow’s “with-it” people will have 
access to and will develop communication habits which we could refer to as 
“communication gone wild”, made up of the hybridisation of different models. 
This is the model of hypercommunication - communication as a value and as a 
tool for the management of everyday life. 

Parallel to these different communication models, we believe it is important to 
point out that decommunication models, which must not be underestimated, are 
also developing. The decommunication models, which we could also refer to as non- 
connection models, or even declared disconnection models, often play a role in 
communication hygiene. Obviously, a decommunication strategy is always relative 
and selective: it is only exceptionally that someone disconnects from the network. 
More often, the person disconnects from certain networks or protects himself from 
the electronic promiscuity and the perverse effects of media immediacy. Disconnec- 
tion strategies have been at work in relation to television for several years: either 
because the person has done away with the television set, or because he only watches 
it very rarely. For the French households which do not have television, we can 
consider that this is an explicit and durable choice. Furthermore, it can be estimated 
that 10% of the population either never watches television, or only does so very 
exceptionally. These habits are marginal, but are tending to increase. 



14 € 



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The analysis of individuals’ telephone habits also enables us to see the strat- 
egies either of decommunication, or selective decommunication. Lifting the 
receiver off the hook, not answering when the phone rings, having someone say 
that one is not there are some of the attitudes of selective decommunication. 
These habits are not frequent either, but they do concern approximately a quarter 
of the number of subscribers at least from time to time. The answering- machine 
used to filter calls, services which identify the caller, being ex-directory, all take 
part in the development of this electronic communication hygiene. More than 
half of the individuals who have an answering machine use it from time to time 
to filter their incoming communications. 

These examples are well known. Most individuals who undergo the stress of 
hypercommunication need to disconnect, set up filters and barriers between 
themselves and their environment in order to become more selective, or simply 
to give themselves breathing space. The analysis of the social use of mobile tech- 
nology shows up a large number of communication hygiene strategies which may 
go as far as the choice of the service (pager versus mobile phone for example), the 
more or less parsimonious manner of giving people one’s mobile telephone 
number, or simply deciding to switch the mobile terminal on or off. Similar strat- 
egies are to be observed on the Internet: we begin by subscribing to distribution 
lists and forums, but faced with the avalanche of messages and the excess of 
information, we stop our subscription. All these types of behaviour are more part 
of communication hygiene than a real decommunication model. They point to a 
considerable market segment for all the techniques and services which enable 
filters and barriers to be installed, and pertinent information to be selected, as well 
as to protect one’s privacy, or indeed to allow time-delayed management of the 
electronic immediacy. 

Essentially, the decommunication model is virtual, or “about-to-be.” But at the 
present time, we must not underestimate its importance. Many a household, for 
example, does not want to be cabled, either because they are perfectly satisfied 
with general interest television, or because they have no time to watch television, 
or because they want to protect their children from the risks of “the box.” In 
France, where approximately 10% of the households are cabled, more than 80% 
of the households which do not have a cable subscription say that they do not 
intend to subscribe within the coming year. These declarations may partially be 
the result of resistance to change or resistance to technical progress. But these 
declarations are just as much the expression of a proactive attitude towards 
decommunication, a refusal to allow television to invade the domestic space. The 
same observations could be made about subscribing to a mobile phone system. It 
would not really be true to think that most people would like to have a cellular 
phone even if the price were right: 80% of French people say that they do not want 
a mobile phone. In this market segment, many people adopt a proactive decom- 
munication attitude, and not only a reactive one, because they do not want to be 
able to be contacted anytime anywhere. Another proactive decommunication 



CniirmmkatHici and [^onviiunkatiofi 

Gerard Claisse 



Selective decommunication as a 
way to electronic communication 
hygiene 



A considerable market segment 
for techniques and services which 
enable filters and barriers to be 
used 



A proactive attitude towards de- 
communication 



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'’-mnrtii'nHM nml rrfrmnr’riiliiin 

Gerard Claisie 


^^Innovation (...) is never the naive entry of 

innocent objects into a virgin space." 

Yves Stourdze 


New barriers between public and 
private spaces 


attitude, or rather an attitude of partitioning communication spaces, is to draw 
up new barriers between private and public spaces, between domestic and profes- 
sional spaces. 

This new communication hygiene, these strategies of decommunication or 
non-connection have usually been ignored by the prophets of the information 
society who are fascinated by the communicational abundance which they 
promise. But in conclusion, it is this communication hygiene, or rather the ethics 
of communication, to which we wish to invite the various actors who have 
decided that their mission in life is to build the society of tomorrow which they 
call the information society. 

Technology is not neutral, it does not fall from the sky like the apple which fell 
on Newton s head. It is a social production which has a time and a place. Tech- 
nology integrates itself, adapts and is distributed according to the economic, social 
and cultural characteristics of the society which uses it, just as it directly or indi- 
rectly transforms, valorises and devalorises the economic, social or cultural 
activities which are linked to it. As Yves Stourdze said: “innovation (...) is never the 
naive entry of innocent objects into a virgin space’7 When we read the numerous 
reports on the economic and social stakes for new technology, we often get the 
impression that only a part of the process has been analysed: technology is 
distributed and radically transforms the everyday life of individuals and society, 
and this transformation is analysed as being a unilateral process of valorisation. 


Suffering from "electronic ubiq- 
uity syndrome" 


The authors often seem to be suffering from electronic ubiquity syndrome 
when they think of the relations between technological change and social change 
within the framework of the problematics of real time (immediacy of effects), 
distanceless space (the universality of the effects), and perfect information (the 
omnipresence of expertise). To this often prophetic perspective and projection, 
we wish to oppose the ethics of reserve, modesty, and prudence, which could be 
expressed through the following three ideas: taking one’s time, letting distance 
play its part, and getting knowledge in order to think out tomorrow’s communi- 
cation. It is only if these conditions - taking one’s time, letting distance play its 
part and getting knowledge - (and no doubt others) are fulfilled that we will be 
able to think out the Ma’ Bell society - the nickname given to the telephone 
company founded by Alexander Graham Bell - without building a new Tower of 
Babel. 


References 




7 Yves Stourdze, Genealogie de la commutation, 
Communications et Societe, IRIS, cahiers de 
recherche Dauphine-ENST, 2, Paris, 1978. 





148 



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Ulrich Thomas Lange 



Dedication - The Culture of Private 
Communication in a Realm of Uncertainty 



“I Jedicalioii is ;hi individual and even a sitcial answer to the 
low involvenienl policies oi short tennisni in modern stieielies 
without necessarily tailing hack into conservativisni ... dedicated 
comnuinication is more than iusi being hmiially addressed. It's 
the perception of being taken seriously as an individual and as a 
perstmality. It has something to do with the feeling o\ being 
accepted.” 




Ulrich Thomas Lange 



C(M)r(linating author for the European Communi- 
cation Council (1 996/97). Founder and director of 
The Institute of Medio Architecture, Berlin. 

Academic training in social sciences, communication 
sciences, journalism and pedagogy at universities in 
Dusseldorf, Essen, Bochum and Athens, Ohio; (PhD 
in communication science at Freie Universitot Berlin, 
1 987). Numerous publications on personal techno- 
logy, e.g. on the use of the telephone in the social 
context of everyday life. Research and consulting on 
medio and technology issues for public and corpor- 
ate clients in Germany and abroad. 



Communication in a Multichannel Environment - 

Will the Mass Media Survive? 1 50 

The Disperse Public and the Death of the Mass Media 1 52 

Specificness and Uniqueness as Preconditions for 

Dedicated Communication 1 54 

Dedicated Communication 1 55 

The Off-line-Generation - Platforms and Levels of Dedication 1 58 

Micropayments in Dedicated Systems 1 60 

Scenarios of the Interactive Home 1 61 



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MkoHon 

Ulrich Thomas Lange 

Easy going and easy selling 
techno hype 



Learning from older innovations 



New communication environments 
as "integrated media" 



When authors write articles on “multimedia” their recipe usually seems to be 
confined but still diverse, but the ingredients tend to be more or less the same: take 
an ounce of Nora and Mine, a piece of Gates, and season the dish with some 
Negroponte. The new world of multimedia apparently needs prophets and 
visionaries, but there is good reason to assume too that the positive function of 
an “information” revolution in the private home, deeply rooted in techno belief, 
is hastily swamped by new sorts of easy going (and easy selling) techno hype. 

There’s no doubt that people would not be telephoning today without the 
adventurous life and work of early inventors like Philip Reis or Alexander Graham 
Bell. Nobody would drive a car without Karl Benz and Gottlieb Daimler. Yet such 
simple labels for complex innovations are already challenged by economists who 
argue that it takes a Henry Ford to make a car affordable and even worse by 
historians and political scientists asking if it did not take Hitler to smoothe the 
way to new dimensions of road traffic. As we admit in times of political correct- 
ness: at least the latter is not true. Hitler did not invent the Autobahn. Moreover 
there could have been a path to an effective highway system without the “German” 
Autobahn and its immanent compulsion to instigate a war. And, as we know 
today as well, the private car was no easy way to paradise. Today we are confident 
that the train system (although outmoded in the fifties and sixties) will not be 
completely replaced by the automobile. Its renaissance has just started. So why 
don’t we learn from older innovations as we enter the era of a new one? 

It was the strong belief of the creators that made innovations happen, but it 
took an even stronger will to assess the effects of technological changes and to 
reflect on ways to avoid the unwanted outcomes of those “revolutions”. Should we 
really blame the visionaries of the multimedia age for their dreams? It seems much 
more the case that the obedient misinterpretations of their blinded followers, 
unable to identify the new communication quality of the “new media age”, are the 
cause of a dangerous phenomenon, which I would like to call the “streamlining 
of ideas” (one form of “infantilisierung” which has been discussed in the intro- 
ductory chapter) which may prevent us from taking the challenge to go a step 
further towards an open communication society. 

Communication in a Multichannel Environment - 
Will the Mass Media Survive? 

Until now mass media products have been dominant on markets for enter- 
tainment, information and education in the private home. There is a tendency to 
create new communication environments as “integrated media”. The basis of this 
process of integration is technological convergence (Baldwin et al. 1996). The 
somewhat strange assumption is that the consumer is waiting for a new tech- 
nological multimedia environment in which text, still pictures, graphics, sound or 
moving images are integrated. The process of digitalisation, by which all sorts of 



150 



The scenarios of interactivity are contradictory and the 
actors have to struggle and to survive in a realm of uncertainty. 



data could be encoded into the same electronic pattern, is made responsible for a 
renaissance in communications. Some people speak of a digital revolution and 
others even forecast the future of mankind as “being digital” (Negroponte 1995). 
For the moment, interactivity in the private home has not found its key appli- 
cation. Visible is the failure of innumerable trials (F&F: Tables 7.1. 2. 1-7, p. 316ff.) 
with “wrecked hopes and misbegotten plans” (Gilder 1994). The scenarios of 
interactivity are contradictory and the actors have to struggle and to survive in a 
realm of uncertainty. But so what? Isn’t this just normal life? Only an addict or a 
neurotic character would take his personal obsessions as an immediate and struc- 
tural change of the whole society. The hysteria about multimedia in the private 
home is based on a severe mistrust and unwillingness to accept the capacity of 
societies and their citizens to cope in a natural manner with technological change. 
The “lost-opportunity-phenomenon”, which is the drama of the impatient lover 
or the rejected nerd, explains social change arising from digital in terms of “yes” 
and “no” or “now” or “never”. This is in fact totalitarian and an indicator of a 
severe misunderstanding of culture and humanity. 

There is no need to hasten away into the multimedia world. If there were no 
new markets anticipated nor huge profits to be gained alone with the pressure of 
international competition, the marketing for multimedia products could “slow 
down to reason” and the decision makers in their private homes could wait for 
better solutions. 

People in general just don’t know which products they intend to use in future 
and only a few among us are waiting for a specific new technology. People may 
expect communication solutions for communication problems they actually 
have, without having any need or suitable opportunity to define in advance what 
they really want. So instead of building new credos on what new service, software 
or technical device people may want or even should want or use, communication 
research, assessing new markets may work on finding out what people actually do 
and what they would actually like, and in particular what they don’t want. This 
research should at first be independent of technological systems. 

Obviously people seek arousal and they feel uncomfortable when they are 
bored. TV rapidly became the principal source of entertainment and information 
in the private home. But its peak is over. The growth rates of usage which we 
experienced in Europe immediately after the broadcasting markets were opened 
to new competitors in the early 1980s are not attainable any more. Although 
there is no heavy decline in usage yet, the stagnation of time spent watching TV 
is obvious. The enthusiasm of the first TV generation is gone; more and more 
people sit apathetic and listless in front of their screen and blame the broad- 
casting companies for the fact that the programmes have got worse, although in 
fact the variety of programmes offered is larger then ever before. A German TV 
viewer may now choose from 16,000 movies per year. This means almost 45 
broadcasted movies are at choice per day. The value added service of interactive 



•• £CC .* 



Oi iEB l wn 



Ulrich Thomas Lange 



Interactivity has not found its key 
application 



The "lost-opportunity-phenome- 
non" as the drama of the im- 
patient lover 



TV's peak is over although there 
is more variety 



151 



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Dedkotion 

Ulrich Thomas Lange 



TV is loved to death 



The death of the mass media does 
not mean that the large audiences 
are dying out. 



Attractive programmes rather 
than new technologies will be the 
powerful locomotive for success 
in the market. 



The mass market will only break 
away in marginal areas. 



TV would be at best an additional daily choice out of those 750 new movies per 
year produced for example in US., Italy and France together. This is not good 
enough for a cultural revolution through video-on-demand. TV as a system has 
for this reason to do more than just increasing selectivity. The well-educated 
people are at the forefront as TV absentees. Even heavy TV watchers are more or 
less fed up with the screen, because they know it so well and they love it so much. 
TV is loved to death. It’s like the crisis in a long-lasting marriage, in which every- 
thing is fine, but the critical impulse of curiosity is not vivid any more. Hence a 
growing community of people has had enough of TV and a decisive minority 
doesn’t even watch it anymore. 

The first and major precondition for a functioning TV (broadcasting) system 
is a large number of viewers and listeners. “At one time, television was a medium 
with audience masses of incredible size. Television continues to aggregate audi- 
ences on this scale but now disaggregates these audiences as well” (Baldwin et al. 
1996). The future of mass communication is now addressed as if mass communi- 
cation in a realm of individual and interactive communication were becoming 
extinct because the larger audiences, which seem to be necessary to finance the 
production of lavish screen attractions, are dying out. But the death of some of 
the classical forms of mass communication in the long run has nothing to do with 
the size of the audiences. It could be predicted for theoretical reasons through a 
change in communication patterns within the traditional media before the 
common carrier communication networks do away with the old distribution 
channels. 

But the situation is not that simple and even if we wanted - culturally and 
economically - to get rid of the screen in the private home, TV remains the chea- 
pest and the most cost-effective form of entertainment. Although the general atti- 
tude towards TV usage - at least in public - may be negative, the TV screen is still 
a much loved companion through the trials and tribulations of life, and an easily 
accessible tool for entertainment. The audiences for an individual product within 
a multichannel context may get much smaller at a specific time, but audio-visual 
products still may reach a larger audience if they stay long enough in the market 
on a variety of “individualised” distribution channels. Innovative ideas for new 
types of content will still find their mass market in the future. In the years to come, 
attractive programmes rather than new technologies to disseminate interactive 
products will continue to be the most powerful locomotive for the broadcasting 
industry. 

The Disperse Public and the Death of the Mass Media 

The mass market will only break away in marginal areas, but the competition 
between traditional broadcasting and video on demand will speed up. Whereas 
the attractiveness of the majority of classical entertainment products, like plays or 
movies, were originally made to last, new genres of entertainment, like shows or 

152 



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magazines, emerged within the frame of broadcasting media. They are intended 
to be consumed immediately and become quickly obsolete through information 
decay. The Zeitgeist demands novelties but there is still enough room to sell reruns 
and replays. Only a few audio-visual entertainment offers die as quickly as actual 
news, but those are the products which will be faced with a lack of an integrated 
audience. Whereas through a differentiation of distribution channels more and 
more people may have the opportunity to see the same movie, the possibility of 
an integrated public debate or reflection on the same political magazine may dra- 
matically decrease. This is the reason why it has been predicted that there will be 
an erosion of public life in the realm of multichannel choice. 

But once again the analysis of social effects is not that easy. If media usage 
generally tends to be high, and even if there is a shift in usage, nobody would 
seriously argue that the media in general are less attractive. New media like the 
WWW in the Internet are coming up with a cornucopia of new opportunities for 
information and distraction. If an event has a strong hook to attract an audience 
it will be widely covered and there will be a common basis for a cultural reference 
among individuals. But the media- oriented viewer will have to give way to occa- 
sional viewers and they will be only reintegrated in cases of very important and 
considerable events. Moreover, the multichannel broadcasting system destroys 
the distinguished and prominent persona which it has to reconstruct at the same 
time with even stronger efforts to attract a larger audience. 

The masses which the mass communication systems intended to deliver with 
their productions never really existed. Mass communication as well as mass pro- 
duction in general is a phenomenon in which you assume that individuals could 
be treated as masses for economical reasons. To describe a number of people as 
being a mass and to “average” people by this means is a purposeful and decisive 
perspective of power (Canetti 1980). The most important element to define mass 
communication according to Maletzke is the idea of dispersity. As the producer 
cannot know and does not want to know the specific person he intends to 
approach with his product he uses a statistical artefact to deal with his public as 
average. The “mean” idea behind mass communication is the least objectionable 
programme for an agglomeration of people, which is built through the metaphor 
of a joint target market. The mass audience cannot be served as an inspired indi- 
vidual. But neither do people really exist as averaged masses nor do they ever 
communicate that way. Even if they are dealt with as masses they remain indi- 
viduals. So the size of an audience is not the most important criterion to define 
masses, it’s the lower level of knowledge which the producer naturally has in 
relation to his public. New types of communication in a new communication 
environment may now and in future generate new knowledge about the con- 
sumer. In so much as the choices on the market seem to be personal so too will 
the idea fade away that the mass market will be a mere delivery system for a dis- 
persed and unknown public. But the lack of knowledge will and should not disap- 
pear completely. Even in interpersonal communications, in which we assume that 



MkoNon 

Ulrich Thomas Lange 



A cornucopia of new opportuni- 
ties 



Masses never really existed. They 
are theoretical constructs of 
power. 



The "mean" idea of the averaged 
user 



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Mkofion 

Ulrich Thomas Lange 



A wrong assumption: The more 
you communicate - the happier 
you are. 



Communications are specific and 
unique. 



Nobody knows what communi- 
cation culture is like. 



the participants should more or less know each other, the necessary stereotypes 
try to “average” us. But although we are used to dealing with those “averages” in 
private communications the appeal of the alter ego is the driving force to be 
curious enough to communicate. 

Individual communication is the same theoretical construct as mass commu- 
nications. Media usage diversified within the last decade and this trend will 
continue to persist in the multimedia age. One of the myths of the so-called “Age 
of Information” is the implicit assumption that modern societies have a general 
tendency to increase communication continuously and that there is some sort of 
a natural law for the development of each individual which could be summarised 
as: “the more you communicate the happier you are”. The traffic within the tele- 
communication networks is constantly growing and it is true as well, and could 
be empirically shown at least for the telephone, that the more people are 
successful in their professional life in terms of income and education, the more 
they tend to have a network of diverse social ties and a capacity to show 
communicative competence (Lange 1993). But nobody really intends to commu- 
nicate: it just happens. 

Specificness and Uniqueness as Preconditions 
for Dedicated Communication 

Think of the following situations: a personal talk on the telephone, a dialogue 
between two journalists, a discourse among scientists, the chit-chat, gossiping 
and tittle-tattling in your neighbourhood, the chatter of some aunts at a family 
meeting, the patter of a salesman, the jabbering or prattling of a scientist in a night 
club, the babble of a child, the drivel among students, the giggling and tittering of 
young girls in the street, the shrieking and squealing of a drunken crowd at a fair- 
ground in the ghost train, the female twaddle which seems so typical from the 
perspective of a man, the gibberish of some Bulgarians which you don’t under- 
stand because you haven’t been smart enough to learn their language, or take into 
account the acoustic nonsense of Monty Python on TV. No intelligent and sensi- 
tive person would use only one word to describe such experiences - especially not 
for the sake of simplicity. Nobody would think of such vivid atmospheres of 
specificness and uniqueness as “communication” - unless he is a communication 
scientist. 

It is the same in the fields of the arts and “official” culture: which painter 
would think while painting or manufacturing a piece of art that he was creating 
a piece of “culture”, which actor would do the same while acting and which author 
while writing? So if I talk of the culture of communication and avoid accuracy in 
describing the real creative context, it appears that I am actually not creating any 
type of it. While using the designation “culture” it seems as if I’m only accounting 
activities to differ them from other more general types of activities, like industrial 
work, administrative services or scientific research. But, as you know, culture as a 



154 



'as much as people get frustrated and bored from 
'reality' outside of their home they demand more dedicated 
experiences in their personal and private life. 



concept could be used in a much broader sense. Industrial, administrative or 
scientific work could be called culture as well because every human activity 
contributes at least something to the change of culture, sometimes it really gives 
a positive impulse and improves culture, but customarily this is done more or less 
without intention - the motives as well as the goals behind a specific activity are 
usually less general than to create just culture. The communication culture we 
create is the variety of occasions which we prepare to allow communication to 
happen. 

The notion “dedication”, which is a conglomeration of connotations, including 
“being directly addressed”, “devoted to” and “involved with”, may be a guideline 
to describe the desire to vividly enhance communication environments. Dedica- 
ted communication needs the freedom of failure and the challenge and mastering 
of choice. It may be less perfect than traditional mass communication, but 
through a lack of distance the emotional involvement may give a different appeal. 
A trend and an expectancy towards dedication is not limited to media usage. 
More and more people expect a plus in dedication wherever they are and what- 
ever they do in their leisure time. As much as people get frustrated and bored from 
“reality” outside of their home they demand more dedicated experiences in their 
personal and private life. The less people may intervene in the “construction” of 
their economy and technology, the more they may intend to “build” and to invest 
in their private homes. Others may feel the limitations of “having” to stay there 
and may look for new opportunities to transcend their “chosen” isolation. 

Dedicated Communication 

“Dedicated communication” is not a new sort of communication. “Dedicated 
communication” describes the tendency of consumers to choose new communi- 
cation environments in which they feel more involved and personally addressed, 
without being necessarily reduced to less attractive forms of interpersonal 
communication. Dedicated communication could be either mass or individual 
communication. But it embodies a new shift towards more personalised and more 
intensified experiences. There may be a lack of dedication in both directions. 
Neither the “perfect” industrial mass communication product nor the sometimes 
irritating or even troublesome “active” individual communication may guarantee 
an adequate stimulus. Communication could be judged in this respect in both 
directions or as Churchill already pointed out for the western democracies: they 
aren’t perfect but appropriate solutions to social problems. 

Mass communication products are created in an industrial context and per- 
fected through a professional division of labour. In dedicated communication 
environments the sender or producer has more knowledge about the later user 
and will create his product much more specifically than in a classical mass 
communication environment. Although you may find devoted and specialised 
listeners, readers or viewers in mass communications, and although they may 



ECC / 



OtdkM 

Ulrich Thurtm lm§^ 



Dedication: 

- being directly addressed 

- devoted to and 

- involved with. 



Dedicated communication could 
be either mass or individual com- 
munication 



"Feedback" and Dedication - 
Knowledge about the later user 
may now become effective. 



155 



•• £CC .• 



Mkotiwi 

Ulrich Thomas Lange 



More choice in a plurifying media 
setting 



New levels of selectivity to 
enhance personalisation 



Dedication and the reintegration 
of communality 



Dedication is more than just inter- 
activity or selectivity 



even feel actively involved and deeply touched, specified dedication was structur- 
ally restricted by the scarcity of channels, and the early motivating enthusiasm for 
the new medium - which made the scarcity less visible - is nowadays gone. This 
is why most of the users did not care too much about dedication in choice. The 
dedicated choice, which the system could not deliver, was compensated with the 
dedication escorting the incredible fact that such technological wonders were 
economically and technologically possii?/e and accessible for everybody. This is the 
reason why some of the older users still have difficulties today in adapting to the 
new multichannel world. They stick to their channels with loyalty and miss the 
common media experience with their fellow family members. Especially those 
people who were not dependent on decisions of other people for the choice of 
which programme to watch, seldom articulated the desire to get a “better” 
programme dedicated to them. But young children and even women suffered 
from a lack of influence on programme choice and are better off with their 
personal views in a plurifying media setting with a multiplicity of channels and 
several TV sets in the private home. 

It took a diversified mass communication system to cultivate the desire to 
sophisticate personal choice. The notion “dedicated communication” could be 
useful in this respect because it describes a way in which the modelling of prod- 
ucts in relation to target groups could be understood as an integrated approach 
to overcome the hurdle of “mean” culture on a new level of selectivity, although 
those artefacts are still tailored mass products. Their range of usage lies within the 
frame of an averaged professional product for a diffuse public, but the dimension 
of personalisation may already be enhanced. But dedication goes far beyond the 
extension of selectivity. The arousal of the common group experience in media 
usage, which is not given any more in the selective setting of the individual, 
amplifies the wish to assert new claims on an intensified and devoted experience. 
The lost world of the former dedication (in relation to communality) can not 
completely be compensated by the new dedication (in relation to choice). This is 
why successful programming even in a world of selective markets will have to 
reintegrate communality on a new level. Media marketing in the world of dedi- 
cated communication turns into event marketing, events which are made to 
deliver new substitutes for the common media experience of former times. 

Interpersonal communication, on the other hand, in which we assume that 
the communication partners are more or less known to each other, may enter the 
realm of dedicated communication as well as a consumable paraprofessional 
product. Dedicated communication in this respect could be attractive because the 
individual may want to receive new types of messages, which are not strictly 
speaking mass products, but have been created individually and solicitously /or a 
larger audience. 

Dedication should not be mixed up with more functional terms like inter- 
active or selective communication. Dedication implicitly includes an evaluation 



15€ 



ECC 



of the depth of personal involvement. As the borderline between low involvement 
usage and the highly devoted usage of mass products may be fluid, dedication 
refers to the difference between the highly and sometimes even extremely 
addicted fan and the normal but passionate consumer, which is the model for the 
dedicated user. If producers refer to a devoted public they very often address a 
juvenile fan public, whereas the much bigger market segment of passionate and 
dedicated consumers and their gourmet capacity to select is more or less 
neglected. 

As with the notion of “entertainment” nobody could say in advance what 
entertainment actually is, but people know if they feel entertained, in retrospect 
at least. So dedication is not an analytical but a normative category which is 
related to the desirable, which may vary from person to person, but people know 
about their desires and passions and prefer to get tailored mass products which at 
least seem to be dedicated to them. Dedicated communication is more than just 
being formally addressed. Its the perception of being taken seriously as an indi- 
vidual and as a personality. It has something to do with the feeling of being 
accepted. 

The regional, religious or political cultures secreted social acceptance. They 
delivered opportunities to build up more or less stable identities or served as 
milestones and identifiers of deviance and resistance. For some time the decay of 
those meaning delivery systems was absorbed by the growth of the importance 
and acceptance of the mass media. Now as the media systems are in the same crisis 
of legitimacy as the traditional systems they survived, communityhecomes a new 
issue in how to build up the necessary rooting within the new social frames, inde- 
pendent from the integrated and reasoning public of the mass media. The “taste 
communities” (Ladeur 1986) were the first step towards the disintegration of the 
already diverse but still more or less homogeneous mass markets of the era of the 
integrated and reasoning public. As soon as the taste identifiers moved from 
stylish and social significance to tribal and accidental, the intensity of living 
emerged as a new concept to qualify media experiences. At the same time as the 
integration function of the big cultivators religion, nation and political orienta- 
tion and mass media started to be replaced, new permissive lifestyles emerged, 
which yielded to new demands for new tools to co-ordinate a plurality of life- 
styles. Fewer people get up at the same time, fewer people take their meals as a 
common ceremony and fewer people work or go to bed in comparable time slots. 
The growth of convivial tools (Claisse 1989) was the pragmatic answer to this 
factual disintegration, the “Wahlverwandschaften” of chosen friends turned out to 
be its idealistic equivalent. But in an individualised context each person has to deal 
with his or her own character as being a stranger to her/himself The community 
problem turns into a psychological problem. The less the permissive social life is 
your enemy and the others refuse to be your competitors, the more you are 
obliged to look outside for the necessary “kick” or challenge. So the importance 
of media experiences is growing to bring at least some variety into the home and 



Mkotion 

Ulrich Thomas Lange 



"normal but passionate" 



Dedication is normative and not 
analytical 



Dedication and the intensity of 
living 



The alter ego as a new stimulus 



157 



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Mkofiofi 

Ulrich Thomas Lange 

the alter ego as a new stimulus. The entertainment industry acts as if people un- 
animously expect only distraction at home, but there will be a new market for 
edutainment, gaming and leisure work which is not at all developed yet. 



The "mobile" and the "personal" - 
strategical platforms towards dedi- 
cation 



Limits and bottlenecks for dedi- 
cated communication 



The surf on a new vogue of imag- 
ined communality 



The Off-line-Generation - Plattforms and Levels of Dedication 

The trend towards making communication more dedicated, or the growing 
attitude of consumers to use media as dedicated followers of new cultural or new 
communication patterns is not related to a specific technology. There might be an 
element of dedicated communication in a more selective usage of the TV screen; 
the success of the mobile phone, the “handy”, could be rooted in its capacity to 
serve as a personalising and intensifying device instead of the less accessible 
household telephone; and the computer may open the door to an individual 
choice of distracting entertainment instead of the TV set. The TV screen is still 
considered a household technology although there is a rapid growth of a second 
or even a third TV set in private homes. The computer is taken as a personalised 
technology, although the software is a mass product and dedicated to an even 
broader audience than some of the mega events which gather a large scale public 
in front of the TV screen. 

Strategically there are different approaches to bringing dedicated communi- 
cation to the private home. The French Telecom used the private telephone to link 
the low resolution Minitel to a new world of databases, whereas the German 
Telecom favoured - rather unsuccessfully - the private TV screen as a means of a 
display for Btx. Internet access in the USA, which seems to be for some people the 
ultimate solution for a mass market of interactivity, owes its internationally higher 
level of penetration to the fact that American telephone companies offer the suit- 
able flat-rates to make usage affordable. The small audience size phenomenon 
which is effective for most of the Pay-TV-offers is due to the fact that free TV is 
spoiled by commercials. None of the interactive trials, as documented below, was 
really a convincing success. There seem to be severe limits to dedicated communi- 
cation, i.e. bottlenecks, which will slow down the whole process. 

The implicit assumption that graphics and visualisation in dedicated systems 
may improve “interactive” involvement and understanding is dubious. The over- 
design of html-pages slowed the Internet down to Worldwide Waiting. Some 
technical systems offer easier access to the inexperienced user, while others, like 
the multiple-choice-interfaces, are too inflexible to serve the sophisticated query 
of a specialist. 

The path to a more dedicated communication is also dependent on the per- 
sonality involved as the decision maker in the private home, as the early adopter 
or heavy user. The desire to demand more dedication may differ with the sex and 
age of the consumer: women tend to use the telephone if they want to enhance 
and to intensify their private life, whereas young men use the computer to surf on 



isa 



^^The clip culture of the very young is a necessary 
precondition towards experiencing the unguided surf 
through the Internet as entertaining." 



a new vogue of imagined communality. Women have different concepts of dedi- 
cation to men. Young people flee into their dedicated peer-group from the TV 
prison of their parents at home, whereas the older generation expect a dedicated 
media answer to the personal cocoon they spin around their private apartments. 

There are different levels of dedication. Primarily dedication in media usage 
is related to content, but new communication environments may redefine the 
locality of usage as well. With mobile communication technologies I may get 
public space dedicated to my personal usage. If the technology will allow me to 
install my electronic neighbourhood (Rheingold 1994) into an alien environment 
then the new place will be less threatening and even better, the new place will 
remind me of being home. 

Dedicated communication is sceptical in relation to authorship. New media 
aesthetics in terms of hyperlinks and individual strategies of reception and 
perception will open the storytelling dimension of the traditional media. This 
erosion of the central dramaturgy has already begun with the aesthetics of the 
commercials and the opportunity to zap them away with the remote control. 
Zapping was the first step towards a more dedicated reception. It did not need new 
networks to foster a new type of successful fast food aesthetic, which had been 
prepared in Sesame Street and is now accepted public culture via channels like 
MTV. The clip culture of the very young is a necessary precondition towards 
experiencing the unguided surf through the Internet as entertaining. 

Dedication may lead to a better orientation and at the same time its hype may 
also increase confusion. Surfing through in the Internet is very often a tiring 
experience of getting lost. The challenge to create new types of order in hypertext 
systems is not yet met. 

The uncertainty of social systems is growing through a lack of stability in 
social institutions and related value systems. When the institutions and the 
localities they are built for don’t match, dedicated systems deliver the necessary 
roots and the continuity to tie something to a virtual place where the past struc- 
ture in “real” life does not exist anymore. 

People prefer to live more and more “off-line”. The individual structure of 
their daily life does not allow as many fixed points any more, which could be 
shared within a broader cultural context. People tend to or at least prefer to choose 
independently the time and moment when they get up, have breakfast, lunch or 
dinner, leave their home or go to bed. Their dedicated time schedule is the frame 
in which each new technology has to offer flexible solutions. This cultural trend 
to live off-line has no direct economical implications as long as people don’t need 
technologies to fill the social gap of personal accessibility on-line. But the on-line 
world at first seems to just make life more expensive and demands prices which 
are still too high in relation to the enhancements which they intend to convey. 



•• ECC .• 



Oi iEB l wn 



Ulrich Thomas Lange 



Public space dedicated to per- 
sonal usage 



Dedicated communication is scep- 
tical in relation to authorship 



The hype of dedication may in- 
crease confusion 



The trend to live off-line: Dedi- 
cated time schedules 



159 



•• ECC 



Mkoim 

Ulrich Thomas Lange 



Micropayments - a way to soften 
buying decisions 



Flat rates limit the risk of over- 
doing it 



Avoid waiting online: Let your 
agent do the walking 



Micropayments in Dedicated Systems 

Experts are still undecided if Pay TV or the Internet will be the key technology 
towards electronic interactivity in the private home. Pay TV seems to be a limited 
market in Europe for those people who are tired of getting their preferred pro- 
grammes interrupted by commercials, or others who do not find their preferred 
products within the frame of free TV As we should know, Pay TV will cost us 
additional money and the only way to relieve the pain is the strategy of splitting 
the bill into smaller payments. As the world of the new interactive media does not 
seem to be a basic need of the majority of the consumers, new types of marketing 
will pave the way and soften the buying decisions. Micropayments are necessary, 
because the selling of less necessary cultural goods is much more difficult than 
selling a car, for which people even save money in the long run to be capable of 
buying it. 

In the world of micropayments the biggest problem from the consumer’s 
point-of-view is the fact that he may lose control over his spending and as many 
people are already in debt “up to the eyeballs” they may increase their borrowing 
in future as well over their heads to a degree which they cannot afford any more. 
Politicians should feel challenged to protect their fellow citizens from new tech- 
nologies and to develop regulations to guarantee at least the transparency of the 
private budgets and they should insist on a system of tariffs in which flat rates may 
limit the risk of overdoing the costly usage of telecommunications. In a “promo- 
tional culture” (Wernick 1991) the system of free choice and equal opportunity 
should be matched by sensitive warning devices if the consumer is approaching 
his financial limits. Instead of transforming every sphere of life into real-time 
events in the networks of costly providers, there should be a new initiative for 
transparent real-time billing systems to keep the on-line world affordable. The 
misleading bias, that the new interactive media cannot be paid for by their 
consumers, is a dysfunctional obstacle for the developing multimedia industry. 

The amount of money which has to be spent for the usage of telecommuni- 
cation systems increases sometimes dramatically, with the time spent on-line. To 
be socially “on-line” or accessible should no longer mean that you are technically 
and economically on-line. “Let your agent do the walking”, and let him wait for 
you in line, is the idea behind new communication systems in which databits may 
represent your personal dedication. The problem is that the technological concept 
of going the next step from customisable systems to intelligent agents is a big chal- 
lenge for man-machine interaction (Baecker 1996, p. 783 ff). The more the system 
will work for you to decrease on-line spendings the less you know what your 
system is really doing and finally you may end up in a world in which the agent 
will spend your money. The call-forwarding device for example is a beautiful tool 
for the service providers to print virtual money in the telecommunication 
networks. 



160 



ECC .• 



If the general desire to communicate increases and if we will have to pay 
money to get our communication system running, then micropayments are an 
ideal instrument to hide the higher costs we have to pay Growing dedication as 
well as “smaller” prices for a service online will make it easier to convince us to pay 
the bill. That will be another reason why new dedicated communication systems 
pretend to rely on more involvement and personalisation. An average desire to use 
a product is not good enough to keep micropayments flowing. The individual 
software, the individual movie, the individual call and the individual information 
will hook us on an expansion of opportunities to pay for them. 

The telephone was the first widespread social system, in which the micropay- 
ment system functioned very well. Our research on telephone usage in the private 
home has shown that the metaphor of the reasonably price conscious and selec- 
tive consumer does not yet exist in the field of telecommunication. Micropay- 
ments tempt us to forget the final price we have to pay. The desirability of a single 
call and not the affordability of the accumulated monthly bill is the main control 
variable to decide upon placing it and even this seems to be rather reasonable. 

If new dedicated communication is to be affordable there has to be a new 
approach to account for performances within the networks. Decentralised 
accounting systems, supported through portable chips, may give the control of 
dataflow back to the user. Anonymous accounting with public ombudsmen 
should guarantee the integrity of data in relation to the flow of money. These are 
a necessary precondition to make dedicated communication feasible. To keep 
control over the dataflow in dedicated communication systems there’s nothing 
better for the moment than a chipcard with your choice at hand. The portable 
chip is the symbiotic answer to the necessary but harmful database which a dedi- 
cated communication world will need to adapt to your personal needs and to 
account through micropayments for “individual” and specific performances to 
make all this possible. But before you may customise the billing systems, you 
should know the complementary scenarios in which interactivity may generate 
new types of payments and you should know as well which of them will influence 
the other. 

Scenarios of the Interactive Home 

The evolution of interactivity has to be understood step by step (F&F: Table 
1.4.3, p. 268). The access to the world of multimedia is related to the ownership 
of the necessary entrance tool (F&F: Tables 2.3. 1.2-3, p. 280f. and 6. 1.2-5, p. 302f.). 
There are eight strategic scenarios for home consumer environments to get 
involved and to gain ground in the realm of dedicated communication: the 
increase in quality scenario, the selective TV scenario, the CD-ROM scenario, the 
Internet scenario, the Web TV scenario, the value added services scenario, the 
home automation scenario and the virtual reality scenario. 



Odkition 

Ulrich Thomas Lange 

Dedication may be misused to 
keep micropayments flowing 



Micropayments tempt us to forget 
the final price 



Keep control over the dataflow: 
the chipcard ~ your choice at hand 



Eight strategic scenarios for dedi- 
cation in the private home 



161 



•• ECC .• 



Mkotiofi 

Ulrich Thomas Lange 



The "increase in quality scenario": 
good products sell for ever 



The "selective TV-scenario": artifi- 
cial access through the buyout of 
events 



The "CD-ROM-Scenario": a hybrid 
technology to bypass the limits of 
online selectivity 



The incrcdNC in qualit\’ sccnarin is by far the best bet for providers to survive 
in new media markets. “Good” audio-visual products will sell forever in whatever 
technological form they may come along. Even the most traditional media like a 
book will find their market if their subject is interesting enough or their style is 
superior. The dedicated user does not want to be restricted to a specific medium. 
As there is no inherent indicator of quality related to the symbolic means of a 
communication technology, the specific and inherent symbolic qualities of dif- 
ferent media will enhance variety and the opportunities to select. The rhetorics of 
multimedia suggest that technology comes first but, as the successful artist or 
producer may argue with equanimity, each of the media will be keen to get him 
under contract. 

“Money makes the world go round” is the global approach for the ''LTeLti\o 
r\' scenario. The selective usage started with the multiplication of TV channels 
and found its most active expression in the sale and rental of video cassettes, 
which for years has been a powerful market in Europe (F&F: Tables 7.2. 3-4, p. 
328f.). The only innovation of interactive TV towards more dedication is the 
nondisturbed reception of a programme commercial free, as video-on-demand 
and pay-per-view services are not yet available in most European countries under 
normal conditions. European Pay TV offers a bunch of selected highlights, which 
were previously available in “Free TV” for almost nothing. Pay TV is even more 
expensive than video rental or video purchase. The dedicated Pay- TV viewer may 
be an “early bird” served through his privileged step in the distribution chain of 
audio-visual products (F&F: Graph 5.8, p. 299). He gets attractive movies only 
some months after their first screening, but the access he gets in other fields is 
artificially created through the buyout of specific events. Until now there has been 
no real competition in Europe on this market till now and new providers will only 
survive if they have the opportunity to sell their products twice or even threefold. 

The f 4 J R( ^ ^1 scenario draws upon the streamlining process to manufacture 
a well-designed audio-visual fast food product. Usage is not continuous and 
drops dramatically when the customer gets accustomed to it. Whereas on the 
American market the stagnation of the CD-ROM is already visible and had been 
considered to be true in several of our expert interviews, the European scientific 
community at least expects a lot from CD-ROM productions. In the home 
consumer market the CD-ROM may function as a cheap archive or encyclo- 
paedia, although there are not enough products adapted to the needs and the 
variety of national cultures in Europe. Considering the prices to conceptualise, to 
edit and to produce an acceptable product (F&F: Table 2. 3. 2.5, p. 283), the range 
of choice of such professional CD-ROM products will be limited for at least 
another decade and a CD-ROM will remain the most sophisticated and most 
expensive audio-visual product in the private home. The CD-ROM will not be 
capable of competing in sales with the book market for at least several years. The 
number of new books in print in Germany for example is 10 times as high as the 
whole number of CD titles available in the world. On the other hand, as the mere 



162 



Within the realm of the Internet, the telecommunication 
providers play the role of the unmotivated slaves unwilling to 
open to their master the kingdom of success. 



technical production costs for a single CD-ROM may decrease and the rewritable 
CD-ROM will occur on the consumer market, the CD-ROM may be the 
necessary hybrid technology to bypass the limits of on-line-distribution, 
especially in the field of special interest magazines. The CD-ROM in the long run 
cannot compete with TV in the field of entertainment as the half-life rate of 
interest demands a continuous renewal of arousal which the CD-ROM cannot 
submit. The higher price still strains the budget of the normal earner and the 
variety of choice on the shelves of the CD-ROMs in the private home will be less 
broad than the still rather limited choice of books in the normal home. The CD- 
ROM will remain a high-end product for sophisticated groups of consumers, but 
the speed of interactivity is convincing and in the world of encyclopaedia the 
logical power of hyperlinks is tremendous. In this respect the CD-ROM is far 
superior to the Internet world. 

The Iniernct icnanu actually seems to be overestimated in the USA and 
underestimated in Europe. The Internet penetration rate in Europe is still rather 
low (Goldhammer/Lange: Table 2, p.49) but the competition on the market for 
telephone services may ease Internet usage through lower on-line prices and flat 
rates. The on-line world of the Internet in comparison to the CD-ROM appears 
to be unlimited in relation to its capacity to store content, but the Internet is still 
too slow to get knowledge present off line. Traditionally the Scandinavian 
countries have a high penetration of telecommunication tools and Britain, 
together with the Netherlands, is at the vanguard of usage among the other Euro- 
pean countries because of its lower rates for on-line services. The high 
penetration of the Internet in Switzerland is due to its usage in the commercial 
sector. France got stuck in Minitel which was ahead in private on-line usage some 
years ago and has fallen back now because Minitel took away the motivation to 
apply for a new Internet account. The leading technology of the Internet is the 
personal computer and the key application of the Internet is e-mail (F8cF: Table 
8. 3. 2.9, p. 346). The number of users is increasing at an incredible speed (F&F: 
Table 8.2.3, p. 335). E-mail enriches the opportunity to customise dedicated mess- 
ages (Blum 1994) to underpin a trend from locally bound immediacy towards 
new types of directness independent of time and space (Lange 1989), and the 
widespread expectancy of new types of wired neighbourhoods are a legend 
(Dohany-Farina 1996). The news- and chat-groups are a new quality of commu- 
nity and their high acceptance and usage an indicator that dedicated communi- 
cation has been neglected by the mass media in the past. Party-lines and dedicated 
calls on the telephone seem to be the equivalent of value added services in the later 
scenario. The European telecommunication system still reacts to those new types 
of usage as if we were still using the telephone switching system exclusively for the 
exchange of short messages. Within the realm of the Internet, the telecommuni- 
cation providers play the role of the unmotivated slaves unwilling to open to their 
master the kingdom of success. In the whole of Europe (England excluded) on- 
line services are still priced too high and deliver their data much too slowly to 



ECC 



Otdccrtion 

Ulrich Thomas Lange 



The "Internet-Scenario": overesti- 
mated in USA, underestimated in 
Europe 



163 



■■ ECC .• 



Odkotiofi 

Ulrich Thomas Lange 



The "web-TV-scenario":theTV- 
tube as a one stop shop for the 
interactive world 



The "value added services scen- 
ario": the personal access manager 



open mass consumer markets. If there weren’t professional providers with an 
excellent customer service, most of the users would get lost in the 
WWW/Internet-jungle. The Internet is still too complicated and it takes a lot of 
time to learn to navigate. New services need new providers (the Internet is the best 
proof of that) because the traditional net providers cannot cope with the Internet 
system: they are too technology oriented and forget the importance of the human 
interface. Online Surfing will not eat up TV time yet (F&F: Table 8.3.1.6, p. 341), 
but the trend towards individual and collective Internet usage is a strong under- 
pinning of the dedicated communication theory. 

The UcbTA'- scenario is a rather new vision which refers to the high acceptance 
of the TV set in less technology-oriented private homes and predicts that in the 
new mass market of Internet the access and content question has not yet been 
solved. Dedication could be sought by the WebTV in an open competition of 
information and entertainment tools. The one stop shop concept still relies on the 
less valid assumption that the tube in the living room is still the cultural centre of 
the private home, although this may vary within the different European countries. 
Most of the Settop-Boxes used in Europe are not really interactive and the fore- 
cast of “interactive TV-households” indicates a rather slow movement from 
“passive” TV to “active” TV (F8cE: Table 7.2.5, p. 329). The WebTV concept may 
open a new mass market but it neglects the serious efforts of the most advanced 
computer users which you find in the group of people with higher income and 
higher education (F&F: Table 8. 3. 2.4, p. 343) to integrate their basis of knowledge 
and entertainment in sophisticated systems of storing, transforming and 
forwarding data. The dedicated dimension in this aspect of usage is the idea of 
actively dealing with data and success in mastering the handling and production 
of information. 

The telephone is the key technology for the \ aluo added services scenario in 
which the volatile interrelation of people is brought to a new peak through the 
management of one’s personal contacts. The telephone is obviously a less debated 
technology, in comparison to TV, with a less negative reputation at least among 
women. This may stem from an overestimation of the “active” nature of the tele- 
phone conversation on one side and on the other, from the high-brow cultural 
bias against the one-way-road of mass communication, for which TV is becoming 
a negative symbol. As the personal communication system diversifies, mediated 
interpersonal communication starts to compete with mass communication. In 
relation to time spent while using it, the TV and even the radio are still leading, but 
in relation to money spent in many modern European households the telephone 
together with other complementary interpersonal communication systems (fax, 
telephone answering machine, the mobile phone and the value added features of 
modern ISDN services) already exceeds mass media consumption. As the 
mediated interpersonal communication seems to be inherently dedicated, this 
adds to the general trend. If Europeans catch up with the regular usage of the tele- 
phone to order food, tickets or other services, to do homebanking or to substitute 



164 



Ulrich Thomas Lange 



mailorders (F&F: Table 7.2.3, p. 329), then the biggest market for interactivity 
could be the plain old telephone system with a traditional high volume of sales 
(F&F: Tables 9.1. 2.3-4, p. 358). Conference calls and audio databases may further 
increase the usage of the telephone system and it is especially unclear yet if the 
videophone is only another value added service or even a powerful emerging and 
coherent new interactive scenario. 

As home communication technologies try to address the relation of the pri- 
vate to the outer world, the home automation scenario refers to the internal 
arrangement of convenience and the necessary tools for achieving a climate of 
comfort. Security services could be highly interactive systems and the monitoring 
of devices in a private home may demand more and more technological commu- 
nication skills or, as a student of ours just put it: “Some people communicate most 
with their refrigerator”. Personal convenience and dedicated comfort are essential 
goals in private life, next to being entertained or adequately informed. They are 
desires which should be considered and applied in constructing new interactive 
products. The early reservation of a ticket may ease a visit and makes the trip more 
comfortable. A reliable and regionally oriented dedicated weather forecast may 
just not only deliver good information, it’s even a life convenience system, if you 
take your umbrella with you on your way to the subway station. Blurred anxiety 
may be the source and the cause of social isolation and a specific fear may demand 
a clearly dedicated interactive solution to avoid a handicap or dismaly. As the 
security paranoia is growing, interactive services offer dedicated solutions for 
personal levels of risk awareness. The public debate about the new opportunities 
of the multimedia age refers primarily to the wishes to get more and more amused 
or entertained. Those desires are somewhat hyped whereas the natural desire to 
live safely and conveniently is very often underestimated. 

Although the cyberworlds of the virtual real it > scenario play an important role 
in multi-media literature there hasn’t been any affordable solution for the private 
home besides some low budget and low performance videogames. The large TV- 
screen and not the ultramodern VR devices will revolutionise the esthetics of the 
private home. The virtual reality scenario is obviously the technologically most 
advanced high-end perspective of interactivity. Instead of watching electronic 
images you may start to play, to work and to live in new virtual environments. But 
those visions, actually presented in form of gimmicks and toys, are very difficult 
to conceptualise and cannot be changed or relaunched at least for several years at 
affordable prices. To be competitive and to reach a broader audience, virtual real- 
ity production would have to be more or less as cost-effective and productive as 
the traditional electronic media . The virtual world will need an on-line supply of 
new inputs, and the key application could still be the games world, which needs 
urgently new impulses (F&F: Tables 2.3.2.4-6, p. 282f). Although the Internet will 
be too slow for the cyberworld, it could be the backbone of data which may be 
brought in to modify the digital Telenovelas. There seems to be no higher level of 
dedication in Cyberia (Rushkoff 1994) than to throw your whole body into such 



The videophone - a new inter- 
active scenario? 



The "home automation scenario": 
new means to live safely and con- 
veniently 



The "virtual reality scenario": too 
real to be virtual? 



165 



ECC 



Mkotion 

Ulrich Thomas Lange 



The multimedia-myth: hype with- 
out vision 



Communication without dedica- 
tion is like knowledge without 
inspiration 



a new communication world. But what about the enrichment of personal fan- 
tasies? The virtual reality may be too real to be virtual. The “physical” body move- 
ment and three-dimensional space crafts of the cyberworld may blow away the 
mental flirt with the surreal provoked by distant dreams and poetic visions. The 
future of virtual reality will rely on its capacity to cope with reality and normality. 
It should be possible to raise questions in virtual reality land and to get an accept- 
able answer instead of being “moved”, overpowered by the hyper application of a 
multiple space idea. The techno myth behind the virtual reality scenario is an 
alienation of the introductory quality scenario. Dedication could be achieved with 
real virtuality as well as with virtual reality. A good story will survive and even 
conquer cyberspace. That is the reason why the old myths of Grimms fairy tales 
maybe successfully relaunched in sophisticated high-tech products like the politi- 
cal correct bedtime stories on CD-ROM. 

A myth is a myth is a myth. It is a classical subject, especially if the story the 
myth is telling could be purified and culturally verified through its usefulness in 
explaining the world or enhancing life by its entertaining dimension. In this 
respect, multimedia in the private home is no myth at all. It is very often hype 
without vision. Communication without dedication is like knowledge without 
inspiration. The rhetorics of multimedia should be confronted with and chal- 
lenged by the protective inertia of reluctant daily life. There is no technological 
way to enhance dedication. What you still need to serve the needs of the modern 
devoted consumer is a capacity and a will to develop social fantasy and a reason- 
able amount of inspiring creativity. 

References 

Ang, len (1 996) Living Room Wars. Rethinking medio audiences for a postmodern world. London: Routledge. 

Boecker, Ronald M., Jonathan Grudin, William A.S. Buxton and Saul Greenberg (eds.) (1 996) Readings in Human-Computer-Interaction: Toward 
the Year 2000. San Francisco:Morgan Kaufmann 

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Policy Perspectives Summary 

Regulation and Deregulation 



The digital age opens a whole new range of conflicts for Europe’s and indeed 
the world’s policy-makers: between the need to regulate, and ensure that copy- 
right is protected, and the need to disseminate information freely, for cultural or 
educational purposes. This section deals with Europe’s current dilemmas in terms 
of regulation, and also examines whether Europe can learn from the example of 
regulators in Japan and the USA. 

Richard Paterson explores the policy implications for Europe of the economic 
and cultural “value chains” emerging from the digitalisation of the audio-visual 
media and the untapped potential of the established media, such as cinema and 
public broadcasters’ archives. 

As is clear from existing European Union legislation and continuing subsidies 
for many industries, regulators and politicians are keen to intervene in the new in- 
formation society. The outcome, however, remains uncertain. Richard Paterson 
warns that the divide between the information rich and information poor may 
become unsustainable unless new legislation takes into account the long-term 
needs of society. At stake is not only the competitiveness of Europe’s media indus- 
tries, but also whether the impact of the digital age is to be of benefit to Europe’s 
citizens. 

Any legislation must ensure the political, social and cultural rights associated 
with citizenship: focusing as much on “rights users” as “rights owners”, while pre- 
venting individual European nations’ cultures from being swamped, by American 
culture or the larger European cultures. No small task for Europe’s leaders. 

In view of this uncertainty over the future, European television companies are 
increasingly turning to new alliances, mergers and acquisitions. With the rules of 
engagement constantly changing (with telecom deregulation and the abolition of 
technical barriers between different sectors), new alliances offer a way of reducing 
or at least sharing the immense risks of seeking new markets for new products. 
Antonio Pilati and Guiseppe Richeri examine the impact of mergers such as that 
between the German media giant Bertelsmann’s television branch and GET, the 
Compagnie Luxembourgoise de Television. 

Of equal interest to public service and private broadcasters is the policy issue 
of harmonising copyright and related rights in the EU’s internal market, an issue 
not only of immense political and legal significance, but also of the utmost com- 
mercial importance. 



167 



Jens Gaster points out the difficulty that copyright currently represents, with 
much legislation difficult to enforce on a worldwide scale in the new information 
society. Currently, different traditions in national legislation have resulted in 
considerable discrepancies in the way intellectual property is protected in Europe 
alone: Jens Gaster examines in detail the steps the EU is taking to harmonise its 
laws. He also explores what needs to be achieved at a global level under the 
auspices of the World Intellectual Property Organisation. 

However, if regulation is difficult at a global level, individual countries have 
their own problems. Hans Kleinsteuber and Marcel Rosenbach look at the 
example set by the USA, where the foundations of communication policy for the 
digital age were already being laid in the 1930s. Relaxed concentration rules, and 
a policy of competition in virtually all markets are ensuring a lively and thriving 
communications industry: can Germany, with its own unique and complex ways 
of regulating the media, hope to follow that example? The gloomy message is that 
without reform of public policy, the answer may be a resounding no. 



ECC 




Policy Implications of Economic and 
Cultural Value Chains 




ilia 



Richard Paterson 



“It is ol Loriiicrn lo .ill that a society of kmnvJcdgt:, properly regu- 
lak'iJ. should he established which offers new entrepreneurial and 
employment opporl unities across a range of industries by acting as 
a driver of new economic activity. Economic activity is becoming 
ever more dependent on the knowledge and the skills of the work 
force. Moweven an examination of where economic value will he 
added needs to take account of the cultural, social and political 
consequences of these changes,'* 



Chief Analyst, Corporate Policy and Planning at the 
British Film Institute. Honorary Professor of Media 
Management at the University of Stirling. 

Professional background includes running the BFI's 
Television Unit and being Deputy Head of Research 
and Education of the BFI. Publications on a variety 
of film and broadcasting issues, e.g. Notional 
Identities and Europe: The Television Revolution 
(1993); Hollywood of Europe?: The Future of 
British Film (1993). Chair of the Cinema Industry 
Working Group of the European Institute for the 
Media (Dusseldorf), member of the Advisory 
Committee of the European Audiovisual Observatory 
in Strasbourg. 



Value Chains and Public Policies 


170 


Convergent Industries and the Value Chain 


171 


Public Policy Issues 


172 


The Changing and Differentiated Value Chain 


173 


The Digitisation Effect: Industry Strategies 


175 


Broadcasting 


175 


Cinema Industry 


176 


Firm Strategies 


179 


The Digitisation Effect; Cultural 


181 


Cultural Value 


181 


Distribution and Content 


182 


Regulatory Responses 


184 


A New Regulatory Agenda 


185 


Concluding Remarks 


185 



169 




ECC / 




Value Chains and Public Policies 



Enhanced cultural value may 
match the additional economic 
value deriving from new services 



1 The "value chain" is an analytical tool intro- 
duced by Michael Porter to explore how com- 
panies within industries identify sources of conr- 
petitive advantage (Michael Porter, Competitive 
Advantage, New York: Free Press, 1985). Paul 
Romer's revision of endogenous growth theory 
has shown the importance of human capital for 
faster growth (Paul Romer, Endogenous Techno- 
logical Change, in Journal of Political Economy, 
vol.98part2, 1990, pp S71 - SI 02). Along- 
side activities adding economic value (which as 
Porter noted are supported by a context of skills, 
infrastructure and technological development) 
we need to assess the changing cultural values 
which are both inputs and outputs to the human 
capital required in the audiovisual industries. An 
amended version of Porter's basic value chain is 
shown below. 



As the age of digital reproduction emerges a new analytical framework is 
needed to understand the commercial and cultural changes which are underway. 
Digitisation of information and its availability through telecommunications 
networks brings with it as yet unknown and unforeseen consequences. Oppor- 
tunities for innovative economic activity will emerge alongside new cultural 
values. It may become an age of empowerment in which access to information 
and the ability to create knowledge develops new levels of creativity. Enhanced 
cultural value may match the additional economic value deriving from new 
services provided in the information society. However, it is equally possible that 
the divide between the information rich and information poor will become 
unsustainable. It is of concern to all that a society of knowledge, properly regu- 
lated, should be established which offers new entrepreneurial and employment 
opportunities across a range of industries by acting as a driver of new economic 
activity. Economic activity is becoming ever more dependent on the knowledge 
and the skills of the workforce. However, an examination of where economic 
value will be added needs to take account of the cultural, social and political 
consequences of these changes. It is necessary to consider whether the virtual 
dimension of the new digital information world will have an impact on the 
understandings, identities and characteristics of individuals in society as well as 
offering better marketing tools for companies to utilise. 

Recent debate within Europe has invoked the notion of the value chain to 
explore the process of convergence between the audio-visual and telecommuni- 
cations industries. However, useful and instructive though the value chain is as an 
analytical tool, so far it has concentrated attention on economic value and has 
been insufficiently attuned to the impact of change and convergence on the public 
sphere and cultural value. We need to consider how convergence will affect cultu- 
ral values and creativity: the domains relating to identity and to the conditions for 
wealth creation.^ 

At its simplest level industrial sectors concerned with value added services, 
and particularly the telecommunications sector, perceive entertainment as an 
attractive inducement for consumers to participate in new services. These new 
services, in this perspective, will sit alongside other information businesses whose 
core function is data collection and distribution. The future information services 
market, broadly defined, will encompass other areas as diverse as health care and 
transport information in its maturity, but while health or financial data exchange 
may be viewed neutrally, cultural exchange is seen, particularly by politicians, to 
pose threats to national “identity” and to the “integrity” of the political space. We 
need, therefore, to consider the appropriate regulatory response in the field of 
culture and the media. 



170 



•• ECC .• 




It is sometimes forgotten that decisions about programme content taken by 
companies in the media will have an impact not only on their profits, employment 
levels and the national balance of trade in audio-visual services, but on the 
enhancement (or abandonment) oPcultural” values. It is this bifurcated perspec- 
tive which suggests the need to understand cultural value as both an input 
(through the deployment of the skills of the work force, themselves forged in 
education and training systems) and an output (in terms of the content created 
with its implicit values affecting individuals as both consumers and citizens). 

In short, in an age of digital reproduction we need to consider the impact of 
change in both the economic and cultural domains. We need to consider the 
changes in the economic value chain of the audio-visual industries and their effect 
on organisational structures and cultural outputs. The requirements of a new 
regulatory structure, which enhances economic activity but takes account of 
educational need and cultural output, need to be established. The changes in the 
Information Society need to be negotiated at every level. In so doing we need to 
move beyond economic considerations to understand the implications of the new 
market developments for individuals in their everyday lives and in their cultural 
experiences. 

Convergent Industries and the Value Chain 

The value chain is a model that describes a series of value adding activities 
connecting a company’s supply side (raw materials, inbound logistics, and pro- 
duction processes) with its demand side (outbound logistics, marketing, and 
sales). It can also be applied to a whole industrial sector defining the various 
elements which underpin its functioning. In the audio-visual sector this includes 
every process which adds value: from the genesis of an idea to production, from 
distribution to consumption. When previously distinct industries converge there 
is inevitable change in the functioning of the economic value chains in each 
sector. For example, the changes in the value adding activities in the distribution 
of software over a telecommunications network are underpinned by the conver- 
ging (and sometimes competing) interests of computer and telecommunications 
companies concerned to extract value from existing sectors of the cultural indus- 
tries. In response existing sectors are forced to accommodate, adjust or change. 

A key factor in the economy of the information society will be the provision 
of intelligent agents for value added services. There are five activities to create 
value from information: gathering, organising, selecting, synthesising and 
distributing. The value chain associated with service provision over networks will 
become closely tied to the industries of cultural production. The recent link 
between the BBC and ICL/Fujitsu in the UK is one example of a move by a 
computer hardware company downstream into content provision.^ 

Information is no longer a supporting element of the value-adding process 
but a source of value itself. In the information world the final value-adding step - 



Decisions about programme 
content have an impact on the 
enhancement (or abandonment) 
of "cultural" values 



The value chain model can be 
applied on the company level as 
well as that of a whole industry 



2 Downstream activities are tliose which follow 
the current value adding activity; conversely 
upstream activities precede the current octivity. 
So, in the audiovisual industries production of 
programming is upstream, exhibition is down- 
stream. 



171 



•• £CC 




^^Regulators and politicians want to be seen 
to act in both the economic and the cultural domains, but 
the consequences of their actions are uncertain. 



The company holding information 
becomes a new locus for value 
creation 



Education is seen as a valuable 
and exploitable market 



3 United States Information Infrastructure Task 
Force Working Group on Intellectual Property 
Rights, Intellectual Property and the National 
Information Infrastructure: the Report of the 
Working Group on Intellectual Property Rights, 
Bruce A. Lehman, Chair, September 1995; 
Commission of the European Communities, 
Copyright and Related Rights in the Information 
Society (Green Paper), COM (95) 382 final, 
July 1995 



the navigation - is “virtual” in that it is performed through and with information. 
Value is added from information gathered in the marketplace. The potential 
attributed to market intelligence from subscription management systems as a 
source of value suggests new opportunities in many service industries. The com- 
pany holding information becomes a new locus for value creation. This is a new 
type of value creation which mirrors, and potentially enhances, the economic 
value chain, as it is based on information about the “values” and cultural identity 
of each individual consumer. This new dimension of the value-adding processes 
poses new conceptual challenges for analysis of media markets. 

It is into this world that regulators and politicians increasingly wish to inter- 
vene. They want to be seen to act in both the economic and the cultural domains, 
but the consequences of their actions are uncertain. Furthermore, their actions are 
susceptible to lobbying by interested commercial parties and other interest 
groups. A current preoccupation is the control of cyberporn on the Internet, but 
the central questions at issue in the audio-visual field are much more funda- 
mental. They concern a new relationship between the economic and cultural in 
the future of developed societies. 

Public Policy Issues 

The debate over intellectual property rights - in the US and in Europe - 
encapsulates the scale and significance of the problem. While copyright protec- 
tion is fundamentally about rewarding originators for the exploitation of their 
intellectual labour it can be (and is being) used to prevent trade. The wider debate 
around the EU Green Paper on Copyright in the Information Society and in 
regard to the Lehmann Report in the US, has shown the range of conflicting 
interests in European and American society.^ There is an attempt to impose a limi- 
tation on educational use. The market in relation to education is seen as valuable 
and exploitable. However, this is contradicted by an assessment of the longer term 
needs of society and the industrial or political consequences of restrictions in the 
use of intellectual property assets. The questions and issues and the informing 
discourses surrounding new legislation on intellectual property rights or any new 
regulatory structures have to be considered in terms of the different interests, 
public and commercial. Which underlying rationales are on offer? Are the conse- 
quences understood? In relation to any future laws in the digital age, whose 
interests are being served? 

Furthermore, there is the question about how much regulation is needed and 
for what purpose? Questions of trade, economic performance, cultural identity, 
social responsibility all become relevant. 

Public policy in regard to the utilisation of any educational or cultural addi- 
tionality deriving from audio-visual output is an important issue. What are the 
conditions which allow a culture and society (and economy) to flourish? Ask 
Microsoft or Apple and they will identify free flow of information (within their 



172 



•• ECC .* 




companies) as key drivers. Is it any different for society tout court? Equally 
important are public policy interventions in infrastructural measures whether 
through the funding of training or the establishment of beneficial fiscal regimes. 
And all these factors have to be considered within a political context which 
includes the anxieties about balance of trade and loss of cultural identity. 

Culture and the values associated with it will continue to be debated in 
political discourse. Politicians will seek to allay fears (perennially about the 
“effect” of different media, occasionally about threats to “identity”) as well as set 
positive outcomes from media provision which they expect regulators to sustain. 
The current regulatory paraphernalia includes controls on content or origin, rules 
on ownership, and quota percentages (in Europe) of European production. These 
rules have often been formulated to answer the problem which arises when 
cultural objectives are in conflict with the commercial ends pursued. In the digital 
age a range of new problems has to be addressed. In particular the possible irrel- 
evance of regulation when there is a global availability of material which cannot 
be controlled locally. 

Cultural value is an output measure which includes issues of quality and 
representations of the cultural diversity of a nation, people or region. A recon- 
ceptualisation of culture in the digital age of reproduction needs to address a 
range of new problems: the origin of the cultural product; the “virtual domain” 
of information about audiences; and a much more complex characterisation of 
the population “consuming” the output. It needs also to examine input measures 
as various as the characteristics of creative “labour” and the availability of 
educational resources for cultural work, and output measures based on the 
content produced on the economic value chain. 

However, cultural value has a different valency in different countries. The 
exclusion of audio-visual services from the final agreement in the GATT negoti- 
ations was based on variable cultural policies across the globe which did not 
correspond with the more established politics of trade. ^ As negotiations moved 
away from trade in goods to trade in services there was a need for an analytical 
framework considering “cultural value” as an interface with economic value 
creation. Culture has an economic value; content produced in an economic infra- 
structure has a cultural value; there is not a simple binary opposition and the 
complexities and interrelationship of the different values need to be understood. 

The approach here begins to establish a framework of analysis based on the 
concept of “value chains” and economic theories of endogenous growth in order 
to provide a greater clarity of approach in public policy discussions and initiatives. 

The Changing and Differentiated Value Chain 

Different companies will supply different value adding activities along the 
value chain of the audio-visual industry. The profit margin at each stage is vari- 
able; dependent on many factors including the degree of competition, first mover 



Current regulatory paraphernalia: 
content, origin, ownership, and 
quota percentages 



Cultural value includes quality 
and representation of the cultural 
diversity of a nation, people or 
region 



4 See, for example, John Croome, Reshaping the 
World Trading System: A history of the Uruguay 
Round, WTO, 1995 p. 358 ff for a description 
of the negotiations in GATS in late 1993 in 
relation to cultural matters and particularly the 
"special nature of audiovisual services"; and 
Toby Miller 'National Policy and the Traded 
Image' in P. Drummond, R. Paterson and J. 
Willis, National Identity and Eurape; The Televi- 
sion Revolution, BFI, 1993 for an analysis of 
the new terms of debate about trade with the 
increased importance of trade in services. 



173 



ECC 




The profit margin at each stage of 
the value chain depends on the 
degree of competition 



advantage and the impact of technological and organisational change. Analysis of 
the future competitive situation in the supply of services attributes different 
margins to activities, and forms the basis for future strategies within firms. In 
exploring specific value chains in different parts of the audio-visual sector it is 
possible to identify the current profit margins (and added value) at each stage of 
the process - although this is an area of current uncertainty and certainly a recent 
report found difficulty in establishing accurate figures. ^ 



In a world of enterprise where information and intellectual property are 
perceived as central to future prosperity it is not difficult to understand the anxiety 
of firms in the media industries devising strategies to maximise their return on 
investment in the information society. 



These changes are occurring because there are areas of high potential income 
emerging downstream in the audio-visual field. With new technologies of trans- 
mission, and new intelligence gathering potential when consumers use services 
offered on these networks, additional market opportunities are emerging. A range 
of new income streams has been developed for films in the last 50 years. The same 
product is now available successively in cinemas, on video, on television etc. This 
model of multiple markets is seen to be further extendable to other “cultural 
products” including games and information. Rights in cultural assets are now 
seen as pivotal for future services. Investment in intellectual property rights has 
become paramount. 



Film remains a very high risk in- 
vestment 



Film remains a very high risk investment but there are many other activities 
in the audio-visual industries which have both less risk and greater predictability 
in their demand pattern. An example would be TV programme production where 
the income is smaller due to more restricted markets but more certain over longer 
periods. Now new value added services are envisaged using network technology 
but with uncertain consumer acceptance, market penetration, or return on invest- 
ment. In the contemporary audio-visual economy new vistas have been opened 
up by the prospect of a digital economy using networks for distribution. Digital 
assets are not used up in their consumption, so that economies of scale can be 
achieved by small companies, and transaction costs are lower for trading digitally 
than in the exchange of analogue materials. 



5 KPMG, Public Policy Issue Arising from Tele- 
communications and Audiovisual Convergence, 
Main Report, London; KPMG and Europeon 
Commission, 1996, p. 21 

6 'Response of IFPI (International Federation of 
the Phonographic Industry) to DG-XV Ques- 
tionnaire on Intellectual Property and the 
"Information Superhighway'"in European 
Commission, Replies from Interested Parties On 
'Copyright and Neighbouring Rights in the 
Information Society' 1994, p. 269 



Value added services deriving from intellectual property and using telecom- 
munications networks for distribution are seen to offer new income streams for 
businesses to develop. However, their economic properties and market potential 
are little understood. As the International Publishers Copyright Council has 
noted, “what new technologies bring is seldom what the first technologists 
intended ... the phonogram was invented as an oral record for businessmen ... the 
telephone was intended as a device to listen to concerts”.^ 

Behind the hype there is clearly some reality: what was once ephemeral has 
become valued and potentially usable as a commodity; archives which were once 



174 



•• ECC .• 




seen as fusty and unnecessary are now viewed as a storehouse of immense value Archives are now viewed as a 

ready to be exploited. What had previously been seen as public goods have storehouse of immense value 

become commodities to be traded. 

It is important too to ensure continued production of intellectual property 
assets. There needs to be a flow of new software, and it must be protected from 
piracy. However, the danger in developing new strategies to address the changed 
business environment is that the cultural dimension will be overlooked. Regula- 
tory codes need to be liberal enough to encourage investment, policed to ensure 
copyright protection, but open enough to support the continuation of cultural 
diversity and creative autonomy. 



The Digitisation Effect: Industry Strategies 



Broadcasting 

For many years television had a well established value chain. The creation of 
the gateway service provider and the new business of subscriber management has 
already begun to shift the locus of power on the value chain. In the near future 
both content creation and distribution may undergo further change in their value 
adding potential, as digital technology contributes to an ongoing restructuring 
across the industry. 

For the television sector the current value chain can be broken down as follows: ^ 



CMtHkvtors m4 CmUmrt OMiim/ 

RifMi H«y«rs PrtfTHHM Makkf 



Irtttotiei DhtrkvtiM 



Gftfwfly Atiw u t 



In the European audio-visual space the position of the public service broad- 
casters will be further undermined as the new system of digital distribution 
evolves. The current income of public sector broadcasters is based on licence fees 
and advertising revenue. However, this will be ever less sufficient to purchase the 
best talent and the best programmes in the face of the increasing financial power 
of purely commercial subscription services. A response and future strategy is 
therefore urgently required which accommodates both economic and cultural 
concerns. 

Plotting the new terrain of business opportunities and identifying future 
investment strategy is now a priority. Working out where value (both economic 
and cultural) is added, and what might be the technological, cultural and political 
determinants of future value adding activities is an urgent necessity in the public 
sector broadcasters, given their additional cultural responsibilities. 

With the industry in flux and the spectre of convergent businesses - and in 
particular the telecommunication companies - exerting a new interest, decisions 
are necessary in the private sector, too. An examination of future growth (and 



The television value chain 



7 This is taken from Mark Oliver, The Broadcasting 
Market to 2005, mimeo, London: BBC, 1995; 
see also KPMG op. cit. for various permutations 
of the value chain in the convergent industries. 



175 



ECC 



If 



An examination of future growth (and competition) in different 




parts of the economic value chain can clarify which areas require active 
engagement and which can be abandoned to other suppliers. 



Social and cultural responsibility 
apply to all firms operating within 
the market 



Successful intervention or partici- 
pation of telcos in content- 
oriented businesses will destabi- 
lise existing relationships across 
the value chain 



competition) in different parts of the economic value chain begins to clarify 
which areas in a business require active engagement and which can be abandoned 
to other suppliers. However, social and cultural responsibility apply to all firms 
operating within the market. Whether this should mean minimum regulation for 
cultural purposes (as effectively already happens with subsidies to film produc- 
tion in many European states) or allowing deregulation to the maximum extent 
possible (KPMG 1996, p. 235) remains a major issue for debate. 

If television has been the first cultural industry affected directly by the digital 
revolution (financial services preceded it), what do the telecommunications 
companies seek to achieve? The telecommunications giants ostensibly wish to 
enhance the use of their networks into which substantial investments have been 
sunk. The telecommunications companies - when acting as utilities - derive their 
revenues through carrying services provided by other companies or from con- 
sumers who effectively lease bandwidth to conduct an exchange transaction. 
However, competition in the telecommunications market is driving down costs 
and many predict a scenario in which telcos will cease to be as profitable when 
they are unable to sell signal carriage for much above its marginal price. 

The key to future profitability for the telecommunications companies will 
then become ownership or participation in value added services. We have seen 
video on demand trials by the telcos across the world to gauge the revenue poten- 
tial of such developments with a range of services including home shopping, 
games and home banking alongside films for rent. However, following varied 
results from these trials the situation remains unclear and the telcos are 
continuing to look at other ways of deploying bandwidth - from improved 
Internet access for individual consumers through to film distribution to cinemas. 

In terms of the value chain the successful intervention or participation of 
telcos in these value adding businesses will destabilise existing relationships across 
the value chain. That this might have a series of cultural effects is an important 
consideration. Destabilisation of the economic value chain could have conse- 
quences in a number of areas of cultural production, including the cinema. 

Cinema Industry 

Cinema is an area which has not been much considered so far in the digital age 
despite the centrality of film to many of the plans being made by the telcos for new 
value added services. The cinema industry offers an important historical case 
study in the operation and evolution of an economic value chain in the “software” 
industry. In its hundred years existence the basic mechanical technology which 
underpins cinema exhibition and the analogue form of film distribution has 
remained unchanged. The industry managed eventually to achieve an accommo- 
dation with the electronic transmission of films on television. It is now again 
facing a new, and perhaps even more difficult challenge with the prospect of both 
digital distribution (and production) of films. 



176 



ECC 




The income stream of film in recent years has become much longer - in terms 
of sites for extracting rents and in terms of the economic life of the film. These are 
often referred to as windows. 

Qmm AklMf/Hotth VMm (RtitiO SifcscripHti TV Tirrtstrid TY 

Historically the income stream has been added to incrementally, but none of 
the changes in consumption modes has fundamentally altered the nature of the 
film production sector. There has been product enhancement - whether bigger 
screen ratios or improved cinema facilities - but no revolution in the supply 
chain. Film is often a very high cost, high risk investment but it has a potential for 
huge returns on that investment when successful, particularly if distributed as 
part of a slate of films. 

What is of increasing importance for analysis, however, is the possible impact 
of the digital delivery of films to cinemas, whether worldwide, regionally or 
nationally. In this situation the release of a film could be simultaneous via satel- 
lite or cable to any number of cinemas. The physical print - subject to scratching 
and dirt - would not be an obstacle to the quality of presentation. Each cinema 
would be able to present a perfect copy and smaller cinemas would gain access to 
current releases sooner and benefit from the advertising campaign on initial 
release. Smaller films might also benefit from a reduced cost of distribution. 

A different set of industry players might emerge able to offset the current 
power of the Hollywood majors. The barriers to entry might be reduced - or at 
least a different set of barriers to entry would emerge. The economic value chain 
for the industry, and particularly current distribution arrangements and relation- 
ships between different firms, may become skewed if digital distribution takes 
hold. Such conjecture allows an interesting set of hypotheses about the future role 
of Europe’s national film industries in developing cultural value and notions of 
identity in the digital age. 

As previously identified by many analyses, including the DG.X Think Tank 
chaired in 1993/4 by Vasconcelos,^ control of distribution is a significant key to the 
power of the US majors in the global audio-visual market. The financial strength 
of the Hollywood majors which allows large investments in new films (and thus 
the cultural values which their content offers) is predicated on dominance in 
global distribution. In many European markets more than 90% of cinema ticket 
sales are for US films. 

Companies will have to make decisions about investments both upstream and 
downstream, and the existence of new domains of distribution alongside new modes 
of production may have a displacement effect between firms. In the new age of 
convergence we may see new players accruing considerable influence across the whole 
audio-visual value chain and particularly in the funding of new film production. 



The income stream of film 



The current power of the Holly- 
wood majors will be challenged 



8 Antonio-Pedro Vasconcelos (chair), Report by 
the Think Tank, Brussels: CEC, DG.X, March 
1994 



177 



ECC .• 




Learning from the Paramount 
decree in 1948? 



Regulatory changes can loosen 
established organisational links 



9 Much recent debate in the Harvard Business 
Review has focused on these questions e. g. 
Jeffrey F. Rayportand John J. Sviokla 'Exploiting 
the Virtual Value Chain', Harvard Business 
Review, November-December 1995. For an 
example of the early manifestations of these 
changes in the production of advertisements, 
where the agency and the production studio are 
respectively in the UK and Australia, see A. 
Chandler, E. Baker, T. Fisher and R. Moss 
'Moving Pictures: A case study of the Videofax 
and Film Production', mimeo. University of Tech- 
nology, Sydney, 1996 



Such changes might he as revolutionary as those which beset the US film 
industry following the Paramount decree in 1948. It is instructive to see if there 
is any way we can learn about the changing relationships of firms from that 
history. The value chain for the cinema industry (production, distribution, 
exhibition) had been abused in the United States through anti-competitive prac- 
tices such as block bookings, binding etc. Introducing competition and forbid- 
ding uncompetitive practices led to a healthier industry at both exhibition and 
production levels - the decrees led to divorcement of theatres and radical changes 
in relationships along the value chain. 

Subsequently the Hollywood production and distribution industry has been 
the subject of frequent changes of control involving conglomerates as various as 
Gulf and Western or Coca Cola and in more recent times SONY, Matsushita and 
Seagram’s. However the characteristics of the companies owning the stock has 
been almost irrelevant. The dominance of global distribution has been sustained 
and wider income streams added for film product. Increased profitability along- 
side an evolving organisational structure of the industry has led to a recalculation 
of the value added (and the rent extracted) at each stage in the chain. The organi- 
sation of production has changed with many independent producers attached in 
different ways to the studios. The key factor then becomes the optimum condi- 
tions for creativity set against the most cost effective mode of production. At the 
same time there have been other adjustments such as the rising influence of 
artists’ agents in packaging films, or new rules for the re-use of an intellectual 
property right in wholly new markets. 

The evidence shows that technological or regulatory changes can loosen estab- 
lished organisational links and invigorate the processes adding value at different 
points in the supply chain. However, it is noteworthy that at each stage of evol- 
ution of the market for film there appears to be some fear of the power of the 
market. So, for example, the recent advent of the DVD (Digital Video Disc) has 
led to a determination by the Hollywood majors to protect software from global 
sale by using a different encoding standard in different territories. The impact of 
new entrants will be met with defensiveness. 

And there will be a number of other consequences in the film business as 
digital techniques of production supplant earlier modes. The film production 
business has been transformed by recent technological innovations with effects 
both on aesthetic style and in the economics of production. It has also been 
accompanied by a need for new skills amongst the workforce. These are the key 
inputs in the creation of innovative films. New technological capabilities and 
network technologies may also have an effect on the character of production as it 
becomes possible to redesign internal and external processes in production to 
improve efficiency and effectiveness.^ We live in an age of digital reproduction in 
which new relationships between organisations will emerge and alter markets. At 



178 



With the long predicted convergence comes 
the need to reposition - to reconsider and to 
identify future high value areas. 



•• ECC .• 




the same time we can expect the cultural value carried by the products to alter 
while the propensity of users to consume will also change. 

Firm Strategies 

The foregoing analysis illustrates the dynamic market conditions within which 
individual firms are operating. Many companies are beginning to consider their 
future options. Value creation in many parts of the media industries has under- 
gone considerable change in recent years and is likely to continue to do so in the 
future. With the long predicted convergence comes the need to reposition - to 
reconsider and to identify future high value areas. So for the telcos if distributing 
other carriers’ signals creates insufficient profit, then the key future profit driver 
has to be the value derived from services offered on the network. For production 
companies the changes in the value chain might lead to additional commissioning 
and financing from new entrants in the field of distribution. 

In the UK, the BBC’s overall future strategy is based on an analysis of the 
profitable areas of activities which it feels it needs to inhabit in order to transform 
itself into both an efficient global player able to produce and sell programmes, 
while also able to continue to play a public role in its own society. The examin- 
ation of the predicted high economic value activities along the chain has led to the 
recent fundamental restructuring of the organisation. Resources becomes a 
separate business unit while programme production is divorced from broad- 
casting and commissioning. New joint ventures with commercial partners are 
planned using digital distribution while a high priority remains the ownership of 
intellectual property rights in programming. Granada Television has adopted a 
different strategy and has identified low cost production and diversified distribu- 
tion as its means to seek added shareholder value in the audio-visual sector busi- 
ness, while eschewing global expansion (for now). 

This can be seen as an industry breakpoint: each company across convergent 
industries will have to make sure that its offering to the market is, and will 
continue to be, superior in terms of customer value and delivered cost. A new 
business system may be required to deliver it. In such situations “the new offering 
typically causes a sharp shift in the industry’s growth rate while the competitive 
response to the new business system results in a dramatic realignment of market 
shares”. Companies will be made and broken on the ability to adapt to, or 
exploit, the rapidly changing environment. 

For many companies the best safeguard and guarantee against being caught 
out at this industry breakpoint seems to be a reliance on strategic partnerships. 
Sometimes these are forced on companies by their need to gain rapid entry to 
overseas markets; for example, BT in European territories; sometimes they are 
stake building in national territories; in other cases they are straightforward risk 
sharing because of the massive uncertainties which companies face. 



Digital reproduction will alter 
markets 



The BBC's future strategy 



10 Paul Strebel 'Creating Industry Breakpoints: 
Changing the Rules of the Game in Long Range 
Planning' vol. 28 no. 2, April 1995 



17 ® 



•• ECC .• 




Cross sector alliances seeking 
maximum flexibility and strength 
in the increasingly global market 



There has been a range of alliances announced in recent years. Some of the 
most interesting examples, including BT/MCI/News International, BT/Mediaset/ 
Albacom, News International/Kirch, BBC/Flextech(TCI), Canal Plus/NetHold, 
Cegetel (CGE, SBC, BT, Vodafone), indicate cross sector groupings involving soft- 
ware and telecommunications/cable companies seeking maximum flexibility and 
strength in the increasingly global market. 



Put simply each of these alliances (putative or real) and many others can be 
analysed from the same principles: assessing risks and opportunities on the econ- 
omic value chain, seeking maximum added value in new spheres relating to 
network distribution, and minimising uncertainty. For many it is unclear which 
is the optimum strategy to adopt. 



The belief in the global orientation of network distribution has become 
accepted wisdom. It assumes economies of scale and scope. It assumes acceptance 
of product in all markets with the minimum of tailoring. It does not take account 
of cultural diversity nor of the needs and expectations of users of new services. It 
is the model of the American film industry - geared to a global market; not of the 
television industry - geared to the national market; it envisages global distribu- 
tion (via telecommunications networks) to address audiences and customers. 
However, globalisation and its consequences must remain an element of uncer- 
tainty for firms as the value matrix draws together culture and economic effects 
more closely. 



Commentators and industry analysts have often been proved wrong in the 
past. When the MPAA resisted first the sale of films to television and later the sale 
and rental of video copies they misunderstood the interdependent functioning of 
each segment of the market. As noted above, audio-visual product, and films in 
particular, now have a much longer income stream which is to a large extent 
dependent on the high visibility and review achieved on theatrical release. The 
function of cinemas in the industry and in the culture of consumption has thus 
changed. 



Lessons from the music industry 



The music industry is an important point of further comparison in any 
analysis. It is an industry in which European companies have implemented 
successful globalising strategies, but which has been able to increase its profit- 
ability through sublicensing of intellectual property rights. The relative ease in the 
trading of rights in the music industry compares with restrictive terms in the 
motion picture business. In the music industry there are multiple income streams 
reinforcing each other. However it is perhaps important to note the relative 
simplicity of the music industry in its current distributive mode - through radio 
and discs - and to consider the defensiveness displayed by the industry about the 
impact of Internet distribution of its material. 



This analysis suggests that new opportunities are emerging, and that invest- 
ment, both in capital and human resources, is urgent if uncertain in rate of return. 



180 



ECC 



ff 



A society with a strong cultural infrastructure will support 
the creation of new economic value/^ 




New service providers have emerged in the financial information sector and it is 
very likely that this will be replicated in the audio-visual sector - establishing new 
relationships with content creators and content owners - offering database 
management, search engines, electronic programme guides. 

There will be other new businesses - niche opportunities in the value chain - 
rights clearance, sales agents - which will have an effect on current players. The 
nature of these businesses is likely to lead to start up small and medium sized 
enterprises (SMEs) in the first phase of convergence as specialisms become valued 
by conglomerates, leading in time to new arrangements of functions within 
companies as they redefine their core businesses. Whether vertical integration 
remains an organisational solution for larger companies is dependent on nu- 
merous calculations. All these factors will have consequences for firm structures 
and alliances between companies across the value chain. 



Opportunities in new relationships 
with content creators and content 
owners offering database manage- 
ment, search engines, electronic 
programme guides 



The Digitisation Effect: Cultural 

Walter Benjamin wrote in the 1930s about the changing perceptions of the 
world offered to individuals in an age of mechanical reproduction inherent in the 
very technique of film production. ^ ^ He also noted how the introduction of sound 
to film production brought the masses into the theatres but also merged new 
capital from the electrical industry with that of the film industry, inter- 
nationalising film production. The convergence now is as dramatic economically 
and culturally as it was in the early 1930s. New art forms and new modes of 
consumption are emerging. If it is in the home that most changes will occur - or 
where most resistance to change is apparent - then we need to consider more 
closely the demand side drivers of the industry. Which services will users want and 
how will they use them in their personal (and working) lives? It is possible to 
suggest a need to understand these changes in the new digital media culture by 
extending the framework introduced by Benjamin who noted the changed 
perceptions of the world allowed by film. It will be necessary to consider how 
material is produced, and then consumed and understood by audiences. As endo- 
genous growth theory shows, there is also an important economic dimension. A 
society with a strong cultural infrastructure will support the creation of new econ- 
omic value. ^2 

Cultural Value 

The notion of cultural value allows us to examine the creative processes across 
the economic value chain of the media industries. As the economic organisation 
of production and distribution changes this has a “cultural” effect at each stage. 
Understanding the conditions for creativity is a paramount concern for govern- 
ments concerned to retain a degree of cultural autonomy. 



Considering the demand side 
drivers of the industry 



1 1 Walter Benjamin, Illuminations, Jonathan Cape 
1970 (Frankfurt: Suhrkamp Verlag, 1955) p. 
246 

12Romer,op. cit. 



181 



£CC .• 




Understanding the conditions for creativity is a 
paramount concern for governments concerned to retain 
a degree of cultural autonomy. 



In material terms cultural value can be seen to be a factor at a series of levels: 



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The outputs of cultural value register in two overlapping dimensions - a 
commercial and a public sphere - oriented to consumption and citizenship 
respectively. The inputs to the production process, the creativity and work skills 
needed to produce cultural objects, translate directly across to the economic value 
chain. Education and training act as the linking value functions across both input 
and output articulated through production. 

We need to map together both levels - the economic and the cultural - in 
order to facilitate policy decisions and to inform the strategies of governments 
wishing to consider appropriate regulatory structures. Governments wish to 
ensure the best service to their populations while securing an appropriate level of 
return on investment for investors. The economic value chain will always be 
dependent on cultural inputs at every stage from a skilled workforce, while new 
cultural value is continually created through the economic processes of produc- 
tion. The media industry will operate through the filter of a regulatory structure 
in the wider economy. Regulations create the conditions for the world of business 
and as a consequence for the world of cultural creativity. 

Goods previously considered as However, the age of digital reproduction changes the market for cultural 

public goods can be charged for goods. In both the distribution and retail of cultural goods the emergence of 

network industries affects the relationships on the value chain. Global delivery 
becomes possible alongside more intrusive market information about consumers. 
Goods previously considered as public goods can be charged for. In the workplace 
the conditions of work are changed and organisational structures redesigned. 
Regulation for a digital age needs to redefine its purview. Should educational use 
be seen as part of a market, or should we ensure a freely available set of services 
based on cultural products to secure a skilled workforce able to create effectively 
in future? Optimistically, the power of the consumer and the strength of the 
demands of the public as citizens might lead to a society of knowledge. 



Consumption and citizenship 
reflect the commercial and the 
public sphere 



Distribution and Content 

Distributing audio-visual material has been and will remain a key business 
area. The power of the distributor in the film industry and of the broadcaster in 
television is considerable. It has both economic and cultural effect. The potential 
value that will be added or extracted as rents in a new distribution nexus remains 
unknown. The use of intelligent agents to add a valuable service and induce the 
consumer to purchase more services will complicate the situation further. 



182 



■■ ECC .• 




The new networks based on an expanding telecommunications infrastructure 
create the possibility of global markets with characteristics which will undermine 
incumbent firms in other “convergent” sectors. Jack Valenti feared, indeed 
impaired the spread of the VCR (wrongly in terms of the interests of the Holly- 
wood majors who now take a higher proportion of their income from video sales 
than the theatrical box office), but it was an understandable fear of loss of control. 
Now the new muscle of distributed networks may alter the focus of the telcos. 
Rather than simply acting as utilities, and with the control of distribution, they 
could gain the power to define content. 

However, though the biggest profits may derive from distribution, content is 
the key to ongoing profitability across all sectors of the business. Content is where 
culture most obviously meets commerce and in the audio-visual sector is an area 
of trading in which Europe is weak. Historically the financing of audio-visual 
content has derived from the investment by companies with distribution 
networks, often in integrated enterprises. 

Financing and producing “content” is related to the ownership of the intel- 
lectual property rights in the asset. In many European countries there is a pro- 
tectiveness of the distinctiveness of cultural difference and subsidies are provided 
for cultural goods. However most justifications for these programmes of support 
have been philosophical or political rather than economic. 

The cultural impact of different media forms is an ever present issue but 
always has to be considered alongside the economic conditions of production and 
distribution. Walter Benjamin wrote about the democratising force of the 
analogue moving image in the 1930s (indeed the fear of this was the reason for 
UK government seeking to abate the influence of US film amongst the British 
working classes and the colonial subjects of the Empire^ xhe pressing political 
question today concerns the cultural power of the image and information in an 
age of digital reproduction - a digital cultural value - with possibly far-reaching 
consequences. Information and cultural works have both a new educational and 
economic importance (and power) in the digital age; they become a contributor 
to competitive advantage and a source of wealth in themselves. 

Culture is about content and its production and dissemination, whether it is 
music, film or any other form. As the IFPI noted in its response to DG.XV s ques- 
tionnaire on copyright law, “Intellectual Property Rights secure for creators, 
publishers, broadcasters, performers and producers the ability to authorize or 
prohibit the public use of their creations in commercially significant ways. These 
rights secure an economic core which must be large enough to generate incentives 
to creation and dissemination, and to permit increasing investments in creative 
labour and entrepreneurship” (IFPI 1994, p. 269). 



The telcos could gain the power 
to define content 



Information and cultural works 
become a contributor to com- 
petitive advantage and a source 
of wealth in themselves 



1S3 



1 3 Ian Jarvie, Hollywood's Overseas Campaign; The 
North Atlantic Movie Trade, 1920-1950, 
Cambridge: Cambridge University Press, 1992 



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Governments have to determine who should benefit, and to what extent, from 
intellectual property rights: the copyright owner or the society which provided the 
wherewithal for the production of the work. 

The important equation in the digital age concerns the relationship between 
organisational form (to finance and facilitate production), employment (to realise 
the creative endeavours of a skilled workforce), dissemination (through global 
networks), citizens’ rights (in terms of access to information), and copyright 
protection. 



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Regulatory Responses 

What is at stake for governments in Europe is both the competitiveness of 
media industries and the cultural integrity and expressiveness of the peoples of 
the regions and nations. The twofold response to regulation canvassed in the 
recent report to DG.XIII (KPMG 1996, op. cit.) - to enhance economic efficiency 
and the public interest with an emphasis on liberalisation of markets - offers a 
sensible first step. Regulatory structures are justified but their scope has to be 
carefully considered. Powers might include the prevention of undue concentra- 
tions of power in these new spheres of activity. 

Any new regulatory framework Inevitably, whenever a new regulatory framework is proposed competing 

invites competing interest groups interest groups come to the fore. On the one hand, responses received by the 

European Commission to its questionnaire on the protection of intellectual pro- 
perty rights in the information society indicated the range of firms’ anxieties 
about future market prospects in a digital environment. On the other hand, there 
are marked differences of emphasis about future strategy in regard to the 
information society between the European Commission’s various Directorates- 
General. Directives and analyses emerging from within the European Union show 
the influence of competing claims for priority. 



184 



•• ECC .• 



"ihe main source of value creation in the information industries 
is the intellectual capabilities of the workforce." 




Interests use the rhetorics of commercial advantage and cultural guardianship 
variously to seek their objectives. This situation is predictable in situations of 
complex industrial change. As noted in the US at the time of telecommunications 
liberalisation: “The outcome of specific regulatory proceedings are shaped by the 
interaction of various players’ strategies and relative political influence, as 
constrained by the formal and informal rules governing activities in the relevant 
jurisdiction”. 

A New Regulatory Agenda 

A new regulatory agenda in Europe for the convergent industries needs to 
establish clear priorities along both the cultural-political and the economic axes. 
Countries need to sustain innovation. The main source of value creation in the 
information industries is the intellectual capabilities of the workforce. As eco- 
nomists predict, it follows that the economies with a larger stock of human capital 
will experience faster growth. Technological innovation has to be afforded 
priority. At the same time it is widely agreed that barriers to trade will slow down 
technological growth. It becomes imperative that the regulatory framework in 
Europe enables adequate access to knowledge to build human capital, while al- 
lowing open market access to non-EU companies. Europe cannot be a laggard in 
the area of information service or media innovation. 

Innovation and creativity in cultural production interweave economic and 
creative inputs. The skillsbase needs to be maintained and continually retrained 
across all functions in the labour market, encouraged as appropriate by fiscal or 
other measures. The market conditions need to provide for organisational inno- 
vation as well as offering sufficient protection from dominant operators in the 
various market sectors. 

In the digital age of reproduction regulation needs to adjust to the paradox of 
cultural specificity and diversity in production, alongside the globalisation of 
distribution. Firm strategies need to be given a clear framework within which 
investment decisions can be made and a levelling of the “playing field” against 
other countries and blocs to ensure a fully competitive market. 

Concluding Remarks 

Media companies articulate their position within a set of understandings 
about the economic value chain, and variously inhabit a “national” or a “global” 
space relating to current and future markets. They take into account the “cultural” 
dimension to the extent that it serves their own commercial end or is imposed 
upon them in some way by regulation. Organisations in the public sector are 
more likely to be constrained by the national market and the need to be in 
harmony with national cultural ideals, indeed to be the fount of their expression. 
Cultural value is then a feature across both sectors but weighted differently in each 
case. 



Adequate access to knowledge is 
imperative to build human capital 



Regulation must create a clear 
framework within which invest- 
ment decisions can be made and 
secure a levelling of the "playing 
field" against other countries 



las 



ECC 




Subsidy creates a negative am- 
bience in a dynamic sector 



Cultural worries are a problem 
within Europe itself as the Union 
seeks to unify economically with- 
out a common language 



Those with an interest in creating regulations - effectively the politicians and 
government agencies - seek to enhance the cultural and economic dimensions in 
the audio-visual sector but without usually considering their relationship. The 
rhetoric can be both defensive and aggressive. Current changes in the industry 
are likely to amplify an unhelpful cultural rhetoric. But in the digital age, conver- 
gence and competition could bring additional profitability and vitality across all 
sectors leading to improved cultural representation. Whether there will be effec- 
tive competition for the Hollywood majors in global markets remains open to 
question and dependent on the strategies of new entrants from different sectors. 

The response of the European Commission to date has been inadequate, not 
because the analysis informing decisions is always wrong but because subsidy 
creates a negative ambience in a dynamic sector. There are important consumer 
needs which do suggest a role for EU engagement - but they are at a different level 
relating to the privileges of citizenship and the development of a skilled workforce 
rather than the featherbedding of uncompetitive industries. 

The organisation of value adding activities within the audio-visual industries is 
changing with technological innovation. The relationship of networking to ques- 
tions of organisational form and dispersal and the impact on skills needs are 
important considerations. The regulatory framework needs to provide the most 
propitious conditions for companies in all parts of the audio-visual industries to 
flourish and maintain profitability. The skilled workforce requires the optimum 
conditions for creativity to facilitate production of the highest quality programmes. 

The final consideration, however, has to be with the enduring cultural worries 
of swamping, whether by American culture or the larger European cultures. In 
such cases for the political classes cultural value outweighs the economic benefits. 
This was effectively the French position in the closing stages of the Uruguay 
Round and it has many political sympathisers across the world. It is a problem 
within Europe itself as the Union seeks to unify economically without a common 
language. Politicians are right to be concerned about the future effect of these 
changes on society. The relative prosperity and well being of citizens will depend 
in part on the answers provided by the rules of the game in the audio-visual sector 
and their impact on people s lives through the cultural values of the films, TV 
programmes and information available to them. 



1 4 One example of this rhetoric - that Britain could 
become the "Hollywood of Europe" - was 
adopted by some British producers in the early 
1990s in arguing for various fiscal measures 
and a "levelling of the ploying field" across 
Europe in relation to state subsidies for film 
production. 



186 



ECC .• 



Antonio Pilati /Giuseppe Richeri 



Strategic Alliances in the 

New Communication Environment 



“The ot agreements and aafiiisitiuns a typical allempl 

hy l>usi nesses lu red nee the uneertaiiity ... while sinuiltaneuusly 
aeLjuiring skills oulside the held nf their own traditional experi 
enee. .. Xloreover, diversiriealion towards the eoiilent sector will 
also have to provide telecom voni parties with new sijurces ot 
income to counierhalance the levelling id transport tantlsT 




Antonio Pilati 



Director of the Istituto di Economia dei Medio at 
Milano. 

Editor of Mind - Medio Industry, o monthly 
newsletter. Publications on the economics of the 
communications industry include lindustrio dei 
medio (Medio industry, Milano 1990), The Medio 
Industry in Europe (editor, London 1992), and 
Doll'alfabetto olle reti (From Alphabets to Networks, 
Romo 1995). Consultant to medio ond tele- 
communication companies and government 
commissions on regulatory and economic issues. 



Foreword 

The Stimulus of Uncertainty 

Agreements, Alliances, Acquisitions and Mergers 

Some Paradigms 

TLC Managers, New Players in Digital Video Service Game 
Commercial Management of "Television" Satellites 



188 

188 

189 

192 

198 

200 




Giuseppe Richeri 



Professor of Communication Theory and Technology 
of New Medio at the University of Bologna; also 
Professor of Communication ond Social History at 
the University of Lugano (Switzerland). 

Publications on medio economics and new medio 
policies in 1 5 different countries, e.g. Los satellites 
de television en Europo (Television Satellites in 
Europe, Madrid 1 988), Lo tv che conto. Lo tele- 
visione come impreso (The TV which Counts. 
Television os Enterprise, Bologna 1993), and 
Televisione e quolitd (Television and Quality, with C. 
Losogni, Romo 1996). Member of the editorial 
boards of several international journals, consultant 
to Qcodemic, corporate and political institutions. 



187 



ECC 




Strategic alliances as a sign of un- 
certainty in a radically changing 
media environment 



Technological and financial re- 
sources are at stake 



The changing legislative environ- 
ment 



Foreword 

The large number of mergers, acquisitions, intercompany investments, joint 
ventures and, in general, strategic alliances which, for some time now, have char- 
acterised the world of multimedia communications, is typical of phases of radical 
change. With the utilisation of digital technologies, new distribution channels, 
new methods of marketing and new forms of consumption, involving both prod- 
ucts and communication services (both traditional and new), are being created. 
It would therefore appear that this is the right moment to start the long-term 
expansion cycle of a sector until recently dominated by unscrambled television. 
Those wishing to participate in the conquest of new markets must however not 
only avail themselves of considerable resources and specific know-how but also 
be capable of facing considerable risks and uncertainties. Hence the move towards 
strategic alliances. Our aim is to underline what is happening in the European 
context. We will do this by taking some of the most important alliances as an 
example. 

The Stimulus of Uncertainty 

Audiovisual and electronic communication businesses are increasingly 
oriented towards developing alliances, agreements, mergers and acquisitions in a 
sector faced by a large amount of uncertainty. In fact, businesses have to face a 
process of radical renewal in terms of products and services, organisation and 
marketing, suppliers and clients in order to have a share in a market whose 
training times and methods are extremely unpredictable. This uncertainty is 
caused by various factors. 

The first concerns the technological resources that offer enormous innovation 
and two weak points. One concerns the methods of transferring innovation from 
the research and development phase to market penetration. The other concerns 
the rate of innovation. In one case, this uncertainty is due to the fact that often, 
when the time comes to market the products (networks, services, terminals) they 
still have functioning defects, are poor quality and generally offer an unreliable 
service, thus damaging or delaying diffusion. In the other case, a problem arises 
when the context in which the economic marketing plan of a technologically- 
based means or service is defined and then subsequently upset by the creation of 
a technologically more advanced product - hence, rapid obsolescence. 

The second uncertainty factor concerns the rules. In various European 
countries the situation pertaining to rules is particularly unstable. Technical 
barriers between different communication sectors (convergence) are simulta- 
neously abolished, the transition from a monopoly to competition within an 
important sector such as that of telecommunications occurs, the most suitable 
forms of the diffusion of new methods and services (cable-TV, interactive, on-line 
multimedia, etc) are delineated and a progressive internationalisation of players 



168 



•• ECC .* 




and markets is apparent. In such a dynamic context, it is difficult to establish rules 
capable of guaranteeing equilibrium and flexibility, continuity and development. 

The third factor concerns the uncertainty of the demand for new products and 
services. In view of the novelty of supply, the wide range of technical options, the 
fact that so many products and services are easily substituted and that, for the 
most part, it is a question of forming an economically solvent demand, it appears 
just as difficult to anticipate the timing and to foresee ways of developing the 
demand itself. The number of failures recorded until now in the launching of 
interactive multimedia services is an example of the degree of risk that charac- 
terises new communication markets. 

A fourth factor of uncertainty concerns access to more attractive products and 
services that offer greater guarantees of success for pay television, theme channels, 
pay-per-view services, etc. In reality, the competition to win the rights for the most 
important sporting events has drastically increased prices as is the case with the 
movie rights of Hollywood major studios. It is therefore necessary to find wider and 
more favourable conditions of exploitation to either reduce or share these risks. 

A fifth factor is linked to the control of user terminals. The moment there is 
the prospect of a large number of digital television channels with conditional 
access, the first person who manages to “market” his own set-top box within the 
family context could act as a gatekeeper, thus risking market fragmentation 
between incompatible terminals or the considerable reduction of competition 
among various operators. 

Agreements, Alliances, Acquisitions and Mergers 

The creation of agreements and acquisitions is a typical attempt by businesses 
to reduce the uncertainty, the risks and the growing complexity of the environ- 
ment in which they operate, while simultaneously acquiring skills outside the 
field of their own traditional experience. In some cases it is a question of the busi- 
ness acquiring new market shares or penetrating new markets or, once again, of 
reaching the critical mass necessary to deal with a new development cycle, etc. 
Within the international context, over the last few years, there have been a large 
number of agreements among businesses (audio-visual, telecommunications, 
information technology) whose objective was one or more sectors undergoing 
convergence towards a chain of multimedia and interactive products and services 
in which the audio-visual sector plays a key role. 

We will now examine the development of agreements from two viewpoints. 
First and foremost, we will examine the series of agreements registered, over the 
last few years, which have involved European, North American and Asian busi- 
nesses. We will then go on to conduct a more in-depth analysis of a limited 
number of recent agreements that have played a particularly significant role in the 
European panorama. 



Demand structures are unknown 



Access to content is crucial 



Who will control the user terminal? 



119 



ECC .• 




From 1993 to 1995 there were 
331 agreements between com- 
munication related businesses 



Between 1993 and 1995, at the Ecole National Superieur des Tdecommunications 
in Brest (France), 331 agreements, involving businesses belonging to three sectors, 
were registered. Their division, according to sector of origin, is shown in the table 
below: 

Table 1: Agreements between Business Sectors 

hi % lifonMtks TflfcoM Avdb-Yinal 

liifofiiNitks H.5 10.3 23.3 

TfltciMMiicottows 8.8 10.3 

Audio- vistfol 17.8 



The table briefly describes the percentage of agreements that involved: 

★ businesses in the information technology sector (14.5%); 

★ businesses in the telecom sector (8.8%); 

★ businesses in the audio-visual sector ( 1 7.8%) 

★ businesses in the information technology and telecom sectors (10.3%) ; 

★ businesses in the information technology and audio-visual sectors (23.3%); 

★ businesses in the telecom and audio-visual sector (10.3%); 

(the remaining 15% of agreements were signed either by businesses belonging to 
the three above mentioned sectors or by other sectors). 

From this chart, it would appear that, during the period considered, the audio- 
visual sector was the most active or rather the most strongly involved in terms of 
agreements. In reality, it is a question of a sector which, in view of convergence, 
represents the content that should give life to the services considered to have the 
most value added (different forms of pay TV, video on demand, etc.) 

If the contents of each agreement are examined as a function of the sector to 
which the business belongs, the following data are obtained: 

Table 2: Functions of Agreements 





CMtMf 


Acctfi 




FkwKI 


DiftrAolioa 


Tolocfii 




Iflfonmitki 


1.59 


11.01 


1270 


2.13 


0.36 


1.24 


37.12 


TtfeceiM 


3.37 


8.70 


3,2 


2.13 


0.36 


4.97 


22.74 


Aiibhvlstfd 


15.36 


R47 


4.44 


3.15 


1.07 


0.71 


40.14 


Total 


2B.6 


34.46 


2(1.43 


7.82 


1.78 


6.93 


100.00 



Sources 



The different variables used to analyse the agreements registered are dichotomous 
(presence or absence) and explain the object of the agreement: 



Table 1: G.OonfNguieriSJ.IeTtaoninCommuni- * Content: an agreement in this sector gives the players involved access to the 
cations & Strategies, no. 1 9 Idate “content” resource, i.e. films, musical products, editorials or other. 

Table 2; Dang-Nguieri & J. le Traon in Communi- 
cations & Strategies. no. 19 Idate 



190 





•• ECC .* 



”lhe content industry is characterised by a prevalent 
trend towards access to new players. 




★ Access: in this case the object of the agreement is access to the end user 
through a terminal (PC, television, set-top box, decoder, etc.); 

★ Equipment: these are agreements relative to any type of material that falls 
within the chain of enhancement of the multimedia industry; 

★ Financial participation: these are agreements with a purely financial content; 

★ Distribution: these agreements concern the distribution channels of products 
and multimedia services, from the acquisition of movie networks to that of 
cable networks. 

★ Telecom: these are agreements that concern telecommunication activities 
(services and equipment). 

This second table shows that most of the agreements concern positions at the 
end of the chain: the agreements that concern access to the end user are posi- 
tioned in first place with 34.4% while those concerning content are positioned in 
second place with 28.6% . 

Within this context we feel that it is interesting to separate the content sector, 
which, in the agreements registered, showed the presence of European businesses 
such as Matra-Hachette, Bertelsmann, Kirch Group, Pearson, Reed International, 
Kluwer, etc. This is a sector characterised by two types of opposing actions. 

a) On the one hand, the content industry tends to converge owing to the fact that 
its contracting power increases considerably compared to businesses that are 
only active in distribution (broadcasters, video services, etc.); 

b) On the other, the multiplication of distribution channels encourages a better 
segmentation of end-clients, it reduces the risks of the production of proto- 
types (which have the possibility of better targeting their own market) and 
lowers the barriers to the entrance of new players. 

By analysing the agreements registered, it can be seen that 10 of these are 
relative to the first hypothesis, i.e. that of concentration, while 22 are relative to 
the entrance of new players into the contents market. 

It therefore appears that the content industry is characterised by a prevalent 
trend towards access to new players. In general it is a question of new arrivals from 
the audio-visual sector, who formerly operated individually as directors, or 
producers linked to the majors and who have now signed agreements with other 
partners to work for themselves and to take advantage of the new opportunities 
offered by the creation of digital technologies. In conjunction with these agree- 
ments in which businesses already active in the content sector have participated, 
there are other agreements, of a more limited nature, in which businesses involved 
in the information technology sector participate and which also involve the 
content sector. 



Access to the consumer and 
content are the most important 
reasons for strategic alliances 



Reasons to converge in the content 
industry 



191 



Alliance No. 1: Bertelsmann 
and CLT 


Some Paradigms 

In reality, in this context it is not possible to provide a detailed explanation of 
the large number of initiatives. We have therefore chosen those which, during the 
course of the last year, appeared to be the most important on a European level. 

The first case concerns two protagonists of unscrambled television, namely 
the merger between the television branch of Bertelsmann and the Compagnie 
Luxembourgoise de Tdevision. 

At the beginning of April 1996 Bertelsmann announced the purchase of 
50% of Audiofina, the financial holding company which owns almost all the 
shares of CLT, contributing Ufa, its own cinema and television branch (esti- 
mated to be worth 5 billion French francs) and 5. 1 billion French francs in cash 
(about US$ 1 billion). Ufa in Germany and CLT will merge (probably in January 
1997) into a single company which will control 89% of RTL (the German 
number one in commercial TV), 50% of Super RTL, 37.5% of Premiere (the 
only analogue pay-TV with about 1.4 million subscribers), 34.7% of RTL2 and 
24.9% of Vox. CLT/Ufas overall share is around 30% of the audience in 
Germany. They also have other sizeable television interests in the Benelux 
countries, in France (39.5% of M6 and 23.7% of TMC) and in the United 
Kingdom (29% of Channel 5). 

Audiofina, the seller, groups the interests of the Belgian financier Albert Frere, 
Havas and Generale des Faux. Through a complicated cascade of financial 
companies, Frere has the control, whereas Havas (who is also the main share- 
holder of Canal Plus) has little influence, which is further declining with the 
entrance of Bertelsmann. 

The splitting up of the ownership of CLT has a certain weight in the evaluation 
of the factors which have guided the choice to make a merger with Bertelsmann. 
In actual fact the agreement is the result of a convergence of the extremely hetero- 
geneous interests of three or four different actors: Bertelsmann, the CLT top 
management, Frere and, possibly, Generale des Faux. These interests are of 
various kinds: strategic, political, financial. 

Bertelsmann appears to be motivated first of all by a strategic interest: rein- 
forcing its position in the television area and increasing its very recently formed 
operating capacity (it only started to diversify from paper to video in the 1980s). 
Alongside this primary interest, there are also tactical motivations regarding 
relations with the other European television giants. For Bertelsmann the original 
option was an alliance with Canal Plus (signed in 1994) to develop pay-TV on a 
European scale. However, a series of factors caused a crisis forcing Bertelsmann 
to rethink its position. There seem to be at least three factors which caused the 
crisis: the difficulty in consolidating the alliance with Canal Plus, especially 
outside Germany (as the latter never agreed to allow its German partner to enter 



192 



the share capital); the emergence of digital technology which raises the investment 
thresholds and, therefore, the risks on the pay-TV market; the advantage, rapidly 
gained by Kirch, its traditional competitor, in developing a digital platform in the 
German market. 

At the beginning of 1996 the sum of these factors made the development of 
digital pay-TV (by now the central pivot of the pay-TV market) a very expensive 
option, with very high risks, at the same time split up among other actors of 
considerable weight (Canal Plus, Murdoch, Deutsche Telekom). Instead of the 
pay-TV option which was becoming rapidly less and less attractive, Bertelsmann 
preferred to orientate its television expansion (deemed essential) towards a more 
traditional area: free TV. This market is already on the way towards becoming 
mature, but it still offers good profit margins. From this perspective the Ufa/CLT 
merger has lots of advantages: 

^ it brings the battle for the leadership of RTL to an end; 

♦ it guarantees certain supremacy on the major television market in Europe; 

♦ it improves the position on the Benelux markets; 

♦ it allows Bertelsmann’s financial power to acquire an effective television 
return, together with the CLT know-how on the rights markets. 

CLT also draws considerable advantages from the agreement from an indus- 
trial and corporate point of view. To start with, it escapes from the strategic 
isolation in which the three-way alliance (Canal Plus, Bertelsmann, BSkyB) placed 
it at the beginning of 1996. Stuck in the field of Canal Plus alliances (with whom 
it shares one of the reference partners, Havas), but without any right of say, before 
the agreement CLT found itself cut off from the pay-TV market, seriously ques- 
tioned by its own partner on the German free TV market and possibly also with 
problems in making wide range investments. After the agreement it instead: 

♦ became the leading company on the German TV market; 

^ found itself with sizeable financial resources for expansion in the coming 
years; 

♦ gained access to the pay-TV market (it has a share of Premiere, it maintains its 
position in TPS, the consortium competing with Canal Plus for the develop- 
ment of digital TV via satellite in France). 

Finally, for Frere, the ex-majority shareholder of CLT, there are strategic and 
financial advantages: 

♦ it consolidates the alliance with Generale des Eaux which is proving to be one 
of the protagonists in Europe of the integrated TV/Telecommunications 
market; 

♦ it is one of the central actors of the communication alliances in the Rhine area 
(Germany, France, Benelux); 

♦ it makes the role of Havas more marginal; 

♦ it monetarises its shareholding in Audiofina more efficiently. 



Advantages of the Bertels 
mann/CLT merger 



193 



Alliance No. 2:The founding of 
Mediaset 



To sum up, the CLT/Ufa merger provides its protagonists with: 

♦ a strategic consolidation on the European free TV market; 

♦ improvements in the tactical position vis-a-vis other operators; 

♦ greater financial power. 

The second operation considered is the creation of Mediaset, the holding 
company controlling the main Italian commercial television group, with outside 
capital other than that of the family of the founder. After a complex financial oper- 
ation which took place in three stages, Fininvest, the holding company of the 
Berlusconi family, reduced its share of Mediaset to 50.69% (updated figures as of 
August 8 1996), 4 weeks after coming out on the Stock Exchange and after the 
greenshoe action. The only other shareholders with over 3% were Nethold 
(6.45%) and Kirch (5.43%), who are also Fininvest partners in Telepiu. Apart 
from Albacom (the joint venture between BT and Bnl, the leading Italian bank), 
all the other main shareholders are financial operators and institutional investors. 

From the Fininvest point of view the operation has three main aims, the first 
financial and the other two political (in the broad sense) .The financial aim is 
probably the most important one. The 1993 balance sheet indicated debts for 
3,920 billion lire (US$ 2,494 million) suggesting a situation close to the danger 
level with profits of 35 billion lire (US$ 22.3 million) and a turnover of around 
1 1,000 billion lire or US$ 6,997 million. Some sales of companies made in 1994, 
especially in the insurance and mass distribution areas, did not solve the prob- 
lems. The entry of fresh capital in the period 1994/1995 was a prime necessity. 

The second aim concerns the political commitments of the founder of Finin- 
vest. The transfer of around 50% of the share capital lessened the conflict of 
interests between the political activity of Berlusconi and the ownership of the 
second biggest Italian television group (with an audience share of over 40%). 

The third aim was also of a political nature, but this concerns the internal life 
of the company. Most of the solutions proposed to decrease the shareholdings of 
the Berlusconi family implied transferring the control of the company (or new 
partners or an institutional type of management outside the family). The solution 
sought and found instead combines the entrance of new capital and the contin- 
uance of the historical management. A key role in reaching this result was played 
by the first three actors (i.e. the Rupert family, the Kirch group and Prince A1 
Walid) who had been convinced to invest in Mediaset without acquiring the 
control of the company. Their decision in fact paved the way for the next two 
stages which brought the Fininvest shareholding to the verge of 50%: the entrance 
of institutional investors and the placing of the company on the Stock Exchange. 

The motivations of the first three shareholders appear at first sight to be stra- 
tegic and secondly financial (they were convinced they were making a good 
investment). The strategic motivation lies basically in the decision to strengthen 
the three-party alliance (NetHold; BCirch Group; Mediaset) which in the turbulent 



m 



ECC .• 




relations between European broadcasters can in the long run prove to be a 
precious tool. The subsequent transfer of NetHold to Canal Plus might appear to 
contradict this interpretation. However, on closer inspection the Rupert family, 
the main shareholders of NetHold, continue to be one of the protagonists of the 
European television scene (it owns 20% of Canal Plus) and in this position it can 
exert pressure through its alliance with Mediaset. 

The Albacom investment assumes a particular aspect. This sealed the oper- 
ating alliance established with the founding of Albacom Industriale (70% Alba- 
com and 30%). With Albacom, BT repeats in Italy the strategy already applied in 
France (the alliance with Generale des Eaux), in the Benelux countries (alliance 
with NS, the state railways) and in Germany (alliance with Viag): reaching agree- 
ments with the leading national industrial and financial operators, to conquer a 
leading position on the TEC market which is due to be privatised. BT provides 
capital and know-how and in exchange demands experience of the domestic 
market, sales skills and infrastructures. From this perpective Mediaset - which has 
exceptional marketing skills, a wide sales network, considerable lobbying ability 
and a good network about to be digitised - represents a very interesting partner. 

The third alliance is centred on the entrance (in mid- July 1996) of BSkyB into 
the share capital of DF 1, the digital platform launched by the Kirch group on the 
German market at the end of July. BSkyB acquired 49% of the company and in 
exchange agreed to invest £ 200 million (about US$ 340 million) in the operation, 
just under half the launch costs foreseen by Kirch of around one billion marks 
(the break-even point should be in 2000). 

For Murdoch the result is extremely significant: after many failed attempts (the 
offer to take over Mediaset; the triangular agreement with Bertelsmann and Canal 
Plus to develop digital pay-TV in Europe), he has at last succeeded in entering the 
continental market, indeed the most important of the continental markets. The 
vertical integration strategy he develops on a world scale and which aims at 
obtaining a proprietary television outlet on all the most important markets (from 
Japan to India to Latin America) reaches a crucial stage. At the same time 
Murdoch consolidates a privileged relationship with the most important owner 
of rights in Europe and establishes good relations with Canal Plus which at this 
stage is developing an entente cordiale with Kirch. 

For Kirch the operation is first of all of great financial value as it enables them 
to split up the considerable effort involved in launching DF 1 . Secondly, it enables 
them, in perspective, to enter the British market as it opens the door to the possi- 
bility of participating in the capital of BSkyB (this operation seems to be at an 
advanced stage of consideration). 

The fourth case concerns the two main protagonists of pay television in 
Europe. This is the merger between Canal Plus and Nethold (there have been 
rumours of incorporation), an operation that still has to be approved by the Euro- 



Alliance No. 3: Murdoch and 
Kirch 



Alliance No. 4: Canal Plus and 
Nethold 



195 



•• £CC .• 




Reasons for Canal Plus and 
Nethold to merge 



The set-top box battle 



pean Union. Canal Plus will acquire an important share of the activities of the 
Nethold Group, in particular FilmNet, the share in Telepiu and Irdeto (with their 
debt amounting to about US$ 330 million) for an overall value estimated at 
approximately US$ 1.8 billion. In exchange, the two Nethold partners, the Swiss- 
South African group Richemond (luxury goods and tobacco) and the South 
African Group MIH (pay-TV), will receive 6.1 million shares in Canal Plus plus 
US$ 45 million in cash. Their share quota will be equal to 20% (Richemond 15% 
and MIH 5%) and will give them the right to three members on the board of 
directors of Canal Plus just like the other two largest shareholders, Havas (17.3%) 
and Compagnie Generale des Faux (15.4%). In 1996 Nethold activities should 
register losses amounting to US$ 140 million. Break-even will probably be 
reached in 1999. 

According to the executive staff of Canal Plus, the digital television battle will 
probably be the hardest battle for the next few years; in order to win it, it will be 
necessary to control more territories and more alliances. The first result of the 
operation will be that Canal Plus will be in a privileged position to develop digital 
television in a good portion of Europe; i.e. in France, Belgium, Holland, Scandi- 
navia, Spain and probably Italy (together with Kirch) . Among the markets 
targeted by Canal Plus for this operation, the most promising is Italy, but in this 
case it will be a question of working with Kirch (which holds a share equal to 
45%). In reality, the merger, rather than being an attack on the new digital televi- 
sion market in Europe, was interpreted as a defensive action imposed by the 
alliance between Kirch and Murdoch which, just a few weeks earlier had acquired 
49%ofDFl. 

According to inside sources at Canal Plus there are three main elements that 
explain the merger. The first: to prevent Nethold from joining forces with Direct 
TV, the powerful American digital television, thus enabling it to become a 
dangerous competitor on a European level. The second: to open some markets 
where Canal Plus was not able to gain a foothold (Eastern Europe). The third: to 
exploit the rights to sports events and films in a larger number of markets. 

But the merger will also offer Canal Plus the opportunity of ending the battle 
for supremacy of the two decoders manufactured respectively by Irdeto, a branch 
of Nethold, and by Seca, a branch of Canal Plus. Kirch had obtained the licence 
from Irdeto to develop and market its D-box decoder in Germany targeted to the 
subscribers of DF 1 digital channels. Canal Plus in conjunction with Seca had 
perfected its Mediabox decoder for the clients of the services that the MMBG 
consortium (now abandoned by Deutsche Telekom) was supposed to have 
launched in competition with DF 1. The prospect now opened by the unification 
of these two businesses is to develop a second generation decoder capable of 
combining the advantages of the two original devices. However this is not an 
immediate prospect because, in the meantime, Kirch has ordered the large scale 
production of D-boxes in order to provide subscribers of DF 1 with a decoder and 



1 % 



ECC 




Premiere has ordered the production of Mediabox, which it intends to launch by 
1996, for supply to digital channel clients. 

This is, therefore, a rather complex operation that will have implications in 
various sectors of the audio-visual industry and which has not yet been 
concluded. Especially, with regard to the entrance of Canal Plus into Italy as 
Kirch’s partner in Telepiu. The first problem is that Kirch, according to the trade 
press, has the power to stop the transfer of Telepiu shares from Nethold to other 
partners and in order not to exercise this power it appears to have stipulated two 
conditions. First and foremost, Kirch would like Canal Plus to support the 
entrance of BSkyB (40% of which is held by News Corp belonging to Rupert 
Murdoch) into Premiere, currently the only pay television channel in Germany 
with approx. 1.45 million subscribers. Canal Plus should sell a part of its shares to 
the British group and convince Bertelsmann to do the same thing so that the 
shares will be equally divided among Bertelsmann, Canal Plus, Kirch (also a 
partner with a 25% share) and BSkyB. Secondly, Kirch wants Canal Plus’ support 
to introduce Premiere programming and its digital channels into the DF 1 
package, the digital television service recently started by it in Germany. But 
Premiere, where until now Kirch has had a minor position, has already announced 
that it intends to launch a digital television service in competition with DF 1. 
Canal Plus will therefore have to convince Bertelsmann to accept the operation. 
But Bertelsmann’s position regarding this subject is known: Kirch must provide 
Premiere with the American films to which it has the rights instead of giving 
them exclusively to the DF 1 pay-TV movie channel. 

The European Union might be able to solve this situation by opposing BSkyB’s 
entrance into Premiere in order to prevent concentration in a single company of 
four large television companies. 



The fifth agreement is that between “C&W and the Cable Companies in the 
UK”. Cable & Wireless would like the new company to become an integrated TLC 
and media provider for local and long distance services, providing telephony, 
video, data transmission, Internet services, as well as a wide range of interactive 
multimedia services. This would place C&W in a better position to compete with 
BT, the leaders on the TLC market in the UK, and with a set of old and new 
players who are about to occupy the emerging digital and multimedial market. 

This operation will lead to the setting up of Cable 8c Wireless Communi- 
cation, which will reach an estimated value of between £5 and 6 billion (about 
US$ 9.3 billion) and will become the main British cable operator : 

♦ with a series of licences which include 5. 948 million homes, or 33% of the total 
homes covered by licence so far : Telewest, the second biggest provider, covers 
3.889 million homes; 

♦ with 2.55 million homes already passed by cable, or 35%, in the whole of the 
UK, whereas Telewest covers 2.012 million homes passed; 



Alliance No. 5: Cable & Wire- 
less and UK cable companies 



Facts on CWC 



197 



•• ECC y 


^^The main interest in the operation for cable 
operators is to gain access. 


The telecom industry moves 
into television services 


♦ with 496,000 subscribers to their cable networks, against the 424,000 Telewest 
subscribers. 

The shares of the new company will be split up as follows : 

♦ Cable & Wireless 52.6% 

♦ Nynex 18.5% 

♦ Bell Cablemedia 14.2%. 

Cable & Wireless will invest £362 million (about US$ 615 million) in the oper- 
ation. Its main aim is to exploit the infrastructures of the cable operators to 
provide its branch Mercury with the necessary local telephone connections in 
order to build it up to handle the increasing competition on long distance tele- 
phone services. Being able to increase the direct connections with the users 
increases the possibility of providing them also with long distance connections. 

The telephone subscribers to the Bell Cablemedia, Nynex and Videotron net- 
works (566,000 domestic users and 55,000 business users) already widely use 
Mercury’s long distance services, as they cost less than the BT ones. 

The main interest in the operation for cable operators is to gain access, 
through Mercury, a company which has a strong cash flow and sizeable profits, to 
the resources needed to extend their networks in the licensing areas. At the same 
time they want to increase their rate of penetration, which is at present around 
20% and is certainly not sufficient to reach a point of economic equilibrium. 

TLC Managers, New Players in Digital Video Service Game 

Until now no category of players capable of assuming a key role in the training 
and exploitation of the new digital television market have come on the scene: 
TLC businesses. These are players to whom particular attention should be paid 
because they could become the leaders of large future alliances. And, as can be 
seen, they are already moving, in part, towards the field of television and new 
services. 

The convergence between telecommunications and European scale television 
is appearing in an ambiguous, but fairly widespread way, to a point where it would 
be advisable to focus on this subject. TLC managers are becoming interested in 
different types of television and video services either directly or through branches 
and holding companies. These initiatives concern various segments of television 
activity. 

Video on demand services: BT made a first experiment with VoD in Colchester, 
Ipswich and will shortly be doing the same in the area of Westminster, London, 
while Telecom Italia, through the holding company Stream, has completed its 
commercial experiment with VoD in Milan and in Rome and will implement a 
regular service from September onwards. 



19a 



•• ECC .• 




Pay per View Services: For more than a year, France Tdecom has implemented 
a pay per view service in partnership with the Lyonnaise des Faux; Telecom Italia, 
through Stream, recently signed an agreement with Telepiu to re-transmit by 
cable series A football matches on a pay per view basis and has rented two trans- 
ponders on the digital satellite Hot Bird Plus. 

Management of cable-TV networks: France Telecom holds the third position 
among the French operators with 353,000 subscribers to cable-TV networks and 
over one million “houses equipped.” Deutsche Telekom has over 16 million sub- 
scribers to its cable TV networks; Telefonica de Espana has founded (it does not 
however appear to conform to the laws in force) some companies to cable the 
largest Spanish cities including Barcelona and Madrid; Telecom Italia is in the 
process of cabling the largest Italian cities with the aim of reaching 10 million 
housing units by the end of the year 2000: finally, different telecommunication 
companies mainly outside Europe (West, Telewest, Nynex, Bell Canada, etc) 
manage a large part of cable television networks and cable telephony in the UK. 

The possibility of supplying a wide range of services while presenting the users 
with a single invoice and offering discounts and cross-promotions of various 
service packages would provide new marketing tools to foster the increase in the 
present rates of penetration of the subscriptions. The new packages could in fact 
offer fixed and mobile telephony services, basic and premium multi-channel 
television subscriptions, interactive and on demand services (audio and video on 
demand, home shopping, home banking, etc.) with costs varying according to the 
demands and requests of the various social groups. Operating in this direction 
should help to improve user fidelity, thus reducing the high subscriber churn rate 
which at present affects the subscriber portfolio management costs. 

Another advantage could stem from the considerable economies of scale 
which should lead to a rationalisation of the general services and to a marked 
reduction in their costs with an estimated saving of £150 million (about US$ 255 
million) in the first year of business. On the strictly TV side Cable 8c Wireless 
Communication would certainly be in a far stronger bargaining position than the 
present cable operators both with regard to the content providers and particularly 
to BSkyB, their main suppliers of TV programmes. 

To conclude, if the operation gets the green light from the anti-trust author- 
ities, the general results will be: 

a) a clear concentration of the cable industry and a reinforcement of the sector 
vis-a-vis BSkyB, the satellite TV channel bouquet provider and market leader 
of British pay TV; 

b) the creation of a strong TV pole capable of generating new channels specifi- 
cally for cable TV networks; 



Packaging all sorts of com- 
munication services as the 
driving force 



Results of the CWC alliance 



199 



•• ECC .• 




Supplying video services ap- 
pears more profitable than 
supplying infrastructures 



Video services could counter- 
act potentially crippling reve- 
nues from traditional telecom 
services 



c) the reduction in the level of competition in the long-distance and inter- 
national TLC services sector; in fact with this operation Mercury will acquire 
a market share which it will be able to control even when other operators start 
offering cheaper international and long distance rates than it does itself 

Commercial Management of "Television" Satellites 

Deutsche Telekom is the largest single shareholder in Astra, currently the 
largest satellite television system in Europe: Stream, the company of Telecom 
Italia, has rented two digital transponders on the Hot Bird 2 satellite soon to be 
launched for the direct transmission of television channels. 

Business or industrial agreements with broadcaster and video-content 
providers: BT has signed agreements with BBC, Carlton Television, Pearson and 
with some major USA companies for the supply of television programmes: 
Stream (Telecom Italia) has signed agreements with the cinema company Cecchi 
Gori for audio-visual products to be offered on VoD and on pay-per-view and 
with Telepiu for the re-transmission of football matches in pay-per-view on cable 
networks. Until recently, Deutsche Telekom was the largest shareholder of the 
MMBG consortium founded to create digital and encrypted television channels; 
other joint ventures are under consideration. 

The interest of TLC providers in audio-visual services (television and video 
services) must not be considered a passing one but rather a basic feature of their 
medium- and long-term strategy. Going from the supply of transport infrastruc- 
tures to the supply of services with a higher value added is today absolutely 
imperative. The need for the telecom companies to massively enter the market for 
the supply of value added services is illustrated in all the sector analyses and in the 
public statements of the managers of the leading companies in Europe and in the 
USA. It can be seen in the various initiatives which are about to be defined or are 
already operational to guarantee the take-off of the information highways (ISDN, 
Integrated Services Digital Network Broadband) and the increase in value of the 
huge investments in the new networks. Telecom Italia plans to invest 

13.000 billion lire or about US$ 8.5 billion to build the first section of a dedicated 
information highway; in France the Therry Report indicates that by 2010 40- 

60.000 billion lire or US$ 25 - 40 billion will have to be invested to build the new 
TLC networks; a similar estimate has been made by a study group on the 
information highways set up in 1994 by the British Ministry of Industry and 
Trade. 

In this way the telecom companies hope to improve their position in a scen- 
ario where the monopolies will soon be dismantled and the communications 
industry will have to accept competition both on the services and on the network 
sides (the EU directive foresees complete liberalisation as of 1998). Moreover, 
diversification towards the content sector will also have to provide telecom 



200 



companies with new sources of income to counterbalance the levelling of trans- 
port tariffs. In all the countries where telecommunications have been made 
competitive from the USA to Japan, the United Kingdom and Sweden, there has 
been a rapid alignment of tariffs to the real costs. Television services and special- 
ised or personalised videoservices, unlike many new services (home banking, 
home shopping, home teaching, telework, telemedicine, etc.) where the devel- 
opment times are still uncertain, have the advantage of addressing an existing 
mass public with forecastable and foreseeable consumption behaviour. 

This important phenomenon will speed up the unification of TLC and televi- 
sion but it also involves serious risks. The TLC providers have in fact a far greater 
financial power than the broadcasters. They also have the means to overcome the 
entry barriers to the entertainment and videoservices market. This means that : 

a) they will be strong potential competitors on the market for buying rights 
(films, events, etc.), 

b) they are able to sustain initiatives where economic success may take a long 
time; the television services and the videoservices supplied by the TLC providers 
will necessarily be in strong competition with the traditional channels in an 
attempt to conquer the attention and time of the viewers who can and want 
to pay for the service. 

c) part of the initiatives of the TLC providers in this field will be directly in 
competition with the activities of the digital television channels which are 
about to take off; these are in fact channels specialising in information, 
programmes for children, quality documentaries, “cultural” programmes, 
educational/training programmes, etc. (the VoD services of BT and Telecom 
Italia-Stream are also pushing the offer of educational programmes and docu- 
mentaries; in Italy Stream is also working on a coded TV channel for children 
together with other partners). 



References 

6. Dang-Nguyen, J. Le Troon (1 995), f analyse de f offre multimedia: un premier examen des strategies d'alliances des acteurs, 
in Communications & Strategies, no. 19, 3^^ quarter 1995, Idate, Montpellier 
6. Fontaine, D. Pouillot (1996), Alliance Strategies in the Telecommunication and Audiovisual Sectors, ENCIP Working Paper 
A. Mauline (1996), Les alliances strategiques dans les technologies de Tinformation, Economica, Paris 



The powers of telecommuni 
cation companies 



201 



£CC .• 



iillMiw CbrimiMM^ 
A. niaiifQ, Rkheri 



202 



• £CC .• 




The Harmonisation of 
Copyright and Related Rights 



"The need Inr safe^iurdiiig a p nr per return for the efforts o\ 
tUJlhtTrs, perfirriners, plionojitrani prodiieers. bnradeasters and 
other rightholders has alsvays been trhvjous in modern societies. 

( hi the other hand. ... limitations of exclusive rights are intended 
to create a balance between the legiliniale interests (rf authors, 
producers, publishers and other categories of rightholders and 
those of users, consumers, competitors, educational and scieiititlc 
coniniuiiilies, and society at large.'' 



Introduction 204 

The Issue of the Scope of Protection 204 

The Need for a Convergence of Copyright and Authors Rights 204 

The 1988 Green Paper and the 1991 Follow-up 207 

The European Directives 207 

The Software Directive 207 

The Rental Directive 208 

The Cable and Satellite Directive 210 

The Term Directive 211 

The Database Directive 212 

The Proposal an "Droit de Suite" 21 3 

The Current Consultation Exercise 213 

The Objective 213 

The Hearing of July 1994 214 

The 1 995 Green Paper - Issues Deserving Priority Attention 214 

The Hearing of January 1996 215 

The Florence Conference 216 

The 1996 Follow-up to the Green Paper 216 

The WlPO Process and the Need for International Solutions 21 7 

Concluding Remarks 217 




Jens L Gaster 



Principal Administrator at the Commission of the 
European Communities, DG XV (Internal Market & 
Financial Services), Unit "Copyright and Neigh- 
bouring Rights, including international aspects". 

Academic training in Law and International Relations 
(first law degree, 1981), postgraduate studies In 
European Integration, Doctor at Low (Dr.jur., 
1 985). Professional experience as attorney in a law 
firm, then as lawyer at the DG VI (Agriculture) of the 
Commission of the European Communities. Publico- 
tions in particular on copyright issues. Delegate in 
the OECD Committee for Information, Computer and 
Communications Policy. 



203 




fCC .• 


"ihe history of copyright protection has always been 
determined by a series of reactions and adaptations of the existing 
legal environment to technical changes. " 


New categories of works, new 
forms of marketing 


Introduction 

The Issue of the Scope of Protection 

The convergence of the 15 EU Member States’ legislation in the field of copy- 
right and related rights is not only of considerable political and legal significance 
but relates to a sector which is of utmost commercial importance. The turnover of 
the so-called copyright and related rights “industries” (print media, arts, music and 
sound recordings, films, broadcasting, computer programmes, databases and other 
types of multimedia works) is currently estimated at roughly 5% of the European 
Union’s GDP. The rapid growth of the information technology and entertainment 
industries contributes to the widespread dissemination of cultural, educational 
and otherwise useful goods and services. Intellectual property has thus become a 
particularly valuable resource in modern societies. 

The history of copyright protection has always been determined by a series of 
reactions and adaptations of the existing legal environment to technical changes. 
New categories of works emerged, such as photos, films or computer pro- 
grammes. Furthermore, new forms of marketing were developed, such as broad- 
casting, television or videograms. Along with these developments, the need for 
safeguarding a proper return for the efforts of authors, performers, phonogram 
producers, broadcasters and other rightholders has always been obvious in 
modern societies. Indeed, intellectual creations and related efforts would not be 
undertaken without any entitlement to appropriate rewards. 

On the other hand the international and domestic legislators had and have to 
take competing interests and concerns of other parts of the public into account. 
The relevant notions are competition, freedom of information, freedom of scien- 
tific research, public domain use, fair dealing or fair use, private use, and other 
types of exceptions or legal licences. Such limitations of exclusive rights are 
intended to create a balance between the legitimate interests of authors, pro- 
ducers, publishers and other categories of rightholders and those of users, con- 
sumers, competitors, educational and scientific communities, and society at large. 

What will, therefore, always be controversial in the course of law-making 
which is intended to adapt the existing body of copyright law to the new chal- 
lenges presented by technological change will be the issue of how to determine the 
correct balance of interests and where to draw the borderline between the exer- 
cise of derogations and limitations in respect of economic rights and outright 
intellectual property piracy. 

The Need for a Convergence of Copyright and Authors Rights 

One of the basic features of copyrights and related rights is that they are exer- 
cised on a territorial basis. Different traditions in national legislation have resulted 
in considerable discrepancies in the way in which intellectual property is 
protected throughout Europe. This has resulted in obstacles to trade in copy- 



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righted goods and services as well as the creation of distortions of competition. 
Such a situation runs counter to the principles of the Common Market which was 
already to be established by 1 January 1969 . The basic freedoms affected comprise 
inter alia the free movement of goods and the provision of services. Under these 
circumstances, the Commission services began in the late 1970s to contemplate 
working programmes which were intended to do away with this unsatisfactory 
situation. 

The basic difficulty in taking any initiatives aimed at the harmonisation of 
intellectual property laws has always been the fact that the EC Member States are 
divided into copyright and droit d' auteur countries. ^ Whereas the United King- 
dom and Ireland apply “copyright”, 12 Continental EU Member States follow the 
authors’ rights tradition. The Netherlands traditionally pursues a copyright policy 
which is somewhere in between the two competing approaches. 

The main distinctive features of the two basic conceptions^ were until recently 
as follows: 

♦ IVrsimalsNl versus economic approach Most continental EU Member States 
attach a high importance to a personalist aspect of authors’ rights, according 
to which a work is inseparable from the person who created it. This resulted 
in the creation of unwaivable moral rights of disclosure, paternity and integ- 
rity in the jurisdictions concerned. By contrast, the common law countries are 
unfamiliar with unwaivability or other restrictions on the transfer of rights. 
Furthermore, they granted until recently only economic rights. Such rights 
may frequently be vested in legal entities ah initio. Employers will be initial 
rightholders in accordance with the principle of “work-made-for-hire”. 

★ Autluirship In continental Europe authors’ rights had originally been de- 
signed to protect the authors of books. Under the common law copyright 
systems protection was instead granted to publishers. 

♦ I'tirmaliUt, ^ Under the common law concepts there were originally certain 
prescriptions of formalities such as registration requirements or obligations 
concerning the printing of copyright notices on the work. Whereas continen- 
tal EC Member States have also granted authors’ rights automatically, the 
common law countries have only abandoned formalities as a result of their ad- 
herence to the relevant multilateral instruments. 

★ Origiiulitv Similar differences traditionally applied in relation to the eligi- 
bility criterion for protection. Under the Anglo-Saxon concepts it has so far 
been sufficient to employ “sufficient skill, labour and judgment” which meant 
that the work originates from the author and is “not copied”. In civil law 
countries only intellectual creations reflecting the individuality of the author 
were protected and a very high level of originality (qualitative or aesthetic 
merit) was sometimes required. This resulted in a situation where far more is 
“copyrightable” than covered by “authors’ rights”. 



Two systems of copyright protec- 
tion within Europe 



Differences until recently 



1 For G thorough study on the origins of "copy- 
righf and "droit d'auteur/' Ginsburg, A Tale of 
Two Copyrights : Literary Property in Revol- 
utionary France and America, in Sherman/ 
Strowel (eds.), Of Authors and Origins, Essays 
on Copyright Law, Oxford 1994, pp. 131 et 
seq.; Davies, The Convergence of Copyright and 
Author's Rights - Reality or Chimera ?[1995] 
lie 964 etseq. 

2 The distinction has been simplified for the 
purposes of this contribution. For a more detailed 
discussion of the "at least two quite distinct tradi- 
tions within the common law net of copyright 
laws," Cornish, The Notions of Work, Originality 
and Neighboring Rights from the View Point of 
Common Law Traditions, in: WlPO (ed.), WlPO 
Worldwide Symposium on the Future of Copy- 
right and Neighboring Rights, Le Louvre, Paris, 
France - June 1 to 3, 1 994, Geneva 1 994, pp. 
81 etseq. 



205 



•• ECC .• 



New challenges and the European 
Commission 


♦ Xcigliboiiring tn related rights Neighbouring rights related to the rights of 
authors strictu senso have developed in Continental Europe thus granting 
protection to specific subject matter below the threshold of originality. Their 
direct object is the protection of certain forms of economic activity, rather 
than the recognition of creativity. Indeed, the protection of phonogram pro- 
ducers and broadcasters as well as that of performers, who are only “auxilia- 
ries” of creators, did not fit into the classic continental concept of authorship. 
In particular the United Kingdom took a different approach by granting copy- 
right protection to sound recordings and broadcasts vested in the maker 
thereof 

♦ ( ^ataloguc'i of liniitatimis versus fair use fiir dcalingexccptioiis Whilst there 
is common ground that limitations or exceptions must not unreasonably 
prejudice the legitimate interests of authors or other rightholders, there are 15 
different views in the 15 EU Member States as to what extent the exclusive 
rights of the rightholder may be cut back “in special cases”. In addition, 
common law countries apply doctrines of fair use / fair dealing to which con- 
crete shape will only be given by case law, whereas under the civil law approach 
precise catalogues and enumerations of limitations are provided for. 

Whilst such discrepancies in copyright and related rights law should not be 
overestimated - all EU Member States having already acceded to the Berne and 
Rome Conventions, which are the relevant multilateral instruments at the global 
leveF - the European Commission has always taken the view that the absence of 
harmonisation in the field of intellectual property could hamper the effective 
functioning of the Single Market, which was to be established by the end of 1992. 
In addition, it was felt that the Member States’ laws needed to be adapted to meet 
technological changes and new challenges. Instead of an ad hoc development of 
such national legislation, contributing to a further fragmentation of the market, 
the required legislative response should come at the Community level. 

In order to prepare for working programmes the Commission services organi- 
sed various consultation exercises and public hearings, undertook dozens of stu- 
dies and had several hundred meetings with virtually all interested circles. In 
particular, it formulated two Green Papers and two communications on the 
required “follow-up”. By doing so the Commission took duly the need for open- 
ness into account. 


3 Unfortunately, certoin Member States would still 
have to take action on the Conventions, as they 
are only signatories to earlier versions of the 
text. 





206 



Mt 



Employers are entitled to exercise the economic rights in 
programmes created by their employees." 



ECC 




The 1988 Green Paper and the 1991 Follow-up 



In June 1988 the Commission published its Green Paper on “Copyright and 
the Challenge of Technology”^ Since it was intended to serve as a consultation 
document it set out the Commission s own views on certain issues and invited 
comments from third parties. The 1988 Green Paper identified 10 areas where the 
Commission considered Community initiatives preferable to independent action 
at the Member State level. 

The consultation process led to the publication in January 1991 of the 
“Follow-up to the Green Paper”. ^ It set out to define a general policy programme; 
outlining the steps the Commission proposed to take following the Green Paper 
and the numerous responses to it. In the “Follow-up” the Commission took the 
view that there was a need for a basic level of harmonisation of copyright and 
related rights law in the Community. Consequently, nine different topics were 
identified. Whilst a proposal for a Council decision requiring Member State acces- 
sion to the Paris Act (1971) of the Berne Convention (1886) and to the Rome 
Convention (1961) failed,^ the 1991 working programme^ has in the meantime 
resulted in the adoption of five Council of Ministers Directives: 

♦ Council Directive 91/250 on the legal protection of computer programmes^; 

♦ Council Directive 92/100 on rental rights and lending rights and on certain 
rights related to copyright in the field of intellectual property^; 

♦ Council Directive 93/ 83 on the coordination of certain rules concerning copy- 
right and rights related to copyright applicable to satellite broadcasting and 
cable retransmission! 0; 

♦ Council Directive 93/98 harmonising the terms of protection of copyright 
and certain related rights^!; 

♦ European Parliament and Council Directive 96/6/EC on the legal protection 
of databases.! 2 

Furthermore, the Commission adopted in March 1996 a proposal for a direc- 
tive on the resale right for the benefit of the author of an original work of art.!^ 

The European Directives 

The Software Directive 

Council Directive 91/250/EEC!^ gives copyright protection to computer 
programmes as literary works within the meaning of the Berne Convention for 
the Protection of Literary and Artistic Works. The question of authorship is 
widely left to the EU Member States. Employers are entitled to exercise the econ- 
omic rights in programmes created by their employees. Moral rights are excluded 
from the scope of the Directive. 



Five Council of Ministers Direc- 
tives already adopted 



4 COM (88) 172 final. 

5 COM (90) 584 final. 

6 COM (90) 582 final. Nevertheless, Member 
States were finally required to proceed 
accordingly by virtue of Article 5 (1 ) of Protocol 
28 of the Agreement on the European Economic 
Area (Treaty of Porto, 1992). 

7 For further details Cohen Jehoram, The EC Copy- 
right Directives, Economics and Authors' Rights, 
[1994] lie 821 et seq.; Jorna & Martin-Prat, 
New Rules for the Game in the European Copy- 
right Field and Their Impact on Existing Situ- 
ations, [1994] EIPR 145etseq. 

8 OJ No. L 122, 17.5.1991, p.42. 

9 OJ No. L 346, 27.11.92, p.61. 

10 OJ No. L248, 6.10.1993, p.l5. 

1 lOJ No. 1290,24.1 1.93, p.9. 

12 0J No L 77, 27.3.1996, p. 20. 

13 COM (96) 97 final, 13.3.1996. 

1 4 For a guide to the Directive cf. Czarnoto & Hart, 
Legal Protection of Computer Programmes in 
Europe, London 1991. 



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ECC .• 




Level of originality harmonised 



1 5 For 0 guide to the Directive cf. Reinbothe & von 
Lewinski, The EC Directive on Rental and 
Lending Rights and on Piracy, London 1993. 



The rightholder has a number of exclusive rights: the right to do or authorise 
reproduction, translation, adaptation, arrangement, and any form of distribution 
to the public, including rental. 

However, some exceptions to these exclusive rights are listed. Normal activi- 
ties, e.g. loading and running the programme, observing and testing its operation, 
are free. 

The most important exception is the possibility of decompiling a programme 
to make it interoperable with other programmes (= reverse engineering). A 
number of conditions aim at limiting decompilation to the minimum which is 
necessary in order to achieve interoperability without prejudicing the right- 
holder’s legitimate interests by creating, for example, a competing programme or 
a programme infringing its copyright. 

With respect to law enforcement, rules on seizure of infringing copies and 
means to circumvent encryption / copy protection systems are prescribed. 

The striking point of the Directive is that the level of originality (eligibility 
criterion for copyright protection) has for the first time been harmonised at the 
European level for a specific category of copyrightable work. The programme 
must be the “own intellectual creation of its author”. No other criteria are 
admitted. This uniform level has required 12 Member States to lower the 
threshold for granting protection and the remaining three to “lift the bar”. It 
should also be noted that protection under the Directive is strong and that in 
particular no home copying exceptions may apply. In addition, the Directive, for 
the first time, allows decompilation. This point was the subject of intense debate 
and resulted in a pragmatic compromise which ascertains in practice that the 
information required for establishing interoperability is made available. 

Only three Member States had implemented the Directive by 1 January 1993, 
its implementation deadline. In the meantime all Member States have enacted 
implementation measures. A review of such national legislation has unfortunately 
revealed a number of inconsistencies with Community requirements which in 
certain instances will lead to infringement proceedings under Article 169 of the 
EC Treaty. 

The Rental Directive 

Directive 92/100/EEC^5 §ets out to provide for an exclusive right to authorise 
or prohibit the rental and lending of both copyrighted works and objects subject 
to neighbouring rights. Furthermore, it provides for a general protection of 
neighbouring rights including the right of fixation, reproduction, broadcasting 
and distribution. 

The rental right is established for the benefit of holders of copyrights. Conse- 
quently the author retains the right to authorise the rental of a copy of his work. 



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even after the copy has been sold. This means, in other words, that the rental right Rental right not exhausted by sale 

is not exhausted. 

Not only authors, but also producers of films and phonograms and per- 
formers (concerning the fixation of the performance) can authorise or prohibit 
the rental of the products or fixations, even though the copy in question has 
already been distributed. However, in order to facilitate the rental of films, the 
Directive prescribes that a performer shall be presumed to have transferred his 
rental right to the producer. Member States may extend the presumption into an 
automatic transfer of the rental right to the producer. They may also provide for 
a similar presumption with respect to authors. In the case of transfer or assign- 
ment of the rental right the author or performer shall retain a right to equitable 
remuneration. This right is unwaivable. Therefore, with respect to authors and 
performers, the rental right has the character of an economic guarantee, rather 
than a right to authorise the rental. 

Member states may derogate from the exclusive public lending right estab- 
lished by the Directive, provided that at least authors obtain a remuneration for 
such lending. 

As regards neighbouring rights the Directive follows closely the Rome Rights of performers 
Convention on the protection of performers, producers of phonograms and 
broadcasting organisations, but goes beyond it in various respects. Performers 
have the right to authorise or prohibit the fixation of their performances, the 
broadcasting and communication to the public thereof, as well as the reproduc- 
tion, rental and distribution of the fixation. Broadcasters enjoy similar exclusive 
rights in relation to fixations of their broadcasts, including reproduction, rebroad- 
casting by wireless means, communication to the public and distribution. Phono- 
gram and film producers are vested with the rights to authorise or prohibit repro- 
duction, rental and distribution in respect of their phonograms or originals and 
copies of their films. Phonogram producers benefit from a remuneration right 
when a phonogram is broadcast. 

Parallel imports into the Community are ruled out under the Directive since 
the distribution right shall only be exhausted where the first sale in the Commu- 
nity of the object concerned is made by the rightholder or with his consent. The 
rental right remains in any event totally unaffected. 

Member States may provide for a number of limitations to the related right 
referred to in the Directive, e.g. private use, use of short excerpts, ephemeral 
fixations and for teaching as well as scientific research purposes. 

Member States were under a duty to comply with the Directive no later than 
1 July 1994. 11 Member States have thus far notified implementing measures. 

Infringement proceedings against the four Member States which are still lagging 
behind will soon lead to cases before the European Court of Justice (ECJ). 



209 



ECC .• 



Country of origin is responsible 


The Cable and Satellite Directive 

Directive 93/83/EEC provides the missing element to the “television without 
frontiers Directive” (89/552/EEC), which was adopted in 1989 without a chapter 
on copyright. Cross-border satellite broadcasting and the cable retransmission of 
programmes from other Member States was obstructed by differences between 
national rules on copyright, and a certain degree of legal uncertainty. Right- 
holders were in fact exposed to the threat of seeing their works exploited without 
payment of remuneration, or that individual holders of exclusive rights in various 
Member States might block their exploitation rights. 

The Directive has done away with this situation. It establishes that copyright 
responsibility for the communication to the public by satellite arises in the coun- 
try of origin of the broadcast. As far as third countries are concerned, under 
certain conditions (uplink from or broadcaster established in one Member State), 
communication to the public by satellite from non-member countries will be 
deemed to occur within a Member State. 


Majority of member states delay 
implementation 


Rights for a satellite broadcast must be cleared in the country of origin 
between the broadcasting organisation and the rightholders. In determining the 
licence fee broadcasting organisations and rightholders enjoy contractual 
freedom (within the limits of competition law) to consider criteria such as the 
potential or actual audience of the broadcast, the language of the broadcast or 
other criteria that they consider appropriate. The Directive also includes specific 
transitional rules for contracts existing before 1 January 1995. 

Furthermore, the Directive harmonises the rights of performers, phonogram 
producers and broadcasting organisations with regard to satellite broadcasting 
according to the principles established by Directive 92/ 100/EEC. Such a Com- 
munity-wide standard was necessary in order to avoid “copyright havens” in the 
country of origin. 

As far as simultaneous, unaltered and unabridged cable retransmission is 
concerned, the Directive introduces rules for the collective management of such 
cable retransmission rights. Cable operators therefore have to negotiate with a 
number of associations of rightholders, each association representing a given 
category of rightholders (such as authors, film producers, performers etc.). A 
cable operator can only retransmit a programme after all the relevant associations 
have given their consent. Negotiations between cable operators and associations 
are promoted by two additional measures. If the negotiation process threatens to 
be blocked in a deadlock, each of the participants can request the assistance of a 
mediator. And secondly, none of the negotiating parties may refuse to enter 
negotiation without valid justification. 

The Directive’s implementation deadline expired on 1 January 1995. As of 15 
October 1996 only six Member States had notified implementing measures. 



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Infringement proceedings against the remaining nine Member States were far 
advanced. 

The Term Directive 

Directive 93/98/EEC harmonising the term of copyright and certain related 
rights^^ is an indispensable element for the establishment of the Single Market in 
goods and services linked to the copyright and related rights “industries”. It sets 
out to establish a total harmonisation of the durations concerned: for copyright 
at 70 years pma {post mortem auctoris) or 70 years after an anonymous or pseud- 
onymous work is lawfully made available to the public, and for related rights at 
50 years after the event which sets the term running. 

In order to have due regard for established rights in certain Member States 
harmonisation of the terms of protection had to take place on the basis of the 
longest durations existing in Member States. The Directive grants a high level of 
protection and is thus conducive to the harmonious development of literary and 
artistic creation in the Community. Rightholders who are not Community 
nationals but qualify for protection under an international instrument benefit 
from the Directive’s terms of protection only subject to the so-called comparison 
of terms (the duration should not exceed that fixed in the country of which the 
rightholder is a national). This rule applies without prejudice to the international 
obligations of Member States. 

The Directive constitutes an important achievement because harmonisation 
is total and deals with crucial issues such as the term in case of joint authorship 
or the duration of the protection of cinematographic or audiovisual works. It also 
confirms that the principal director of a cinematographic or audiovisual work is 
to be considered as an author. Furthermore, it provides for a uniform threshold 
of originality for copyrightable photographic works (eligibility criterion for 
protection). Finally, it creates a new related right protecting previously un- 
published works and grants an optional protection of critical and scientific publi- 
cations. 

The Directive’s provisions on application in time are particularly noteworthy. 
The terms of protection provided for by the Directive apply to all works and 
subject matter which are protected in at least one Member State , on 1 July 1995. 
What is quite remarkable is the combined effect of such provisions and the prin- 
ciple of non-discrimination on grounds of nationality of the EC Treaty as inter- 
preted by the ECJ in the “Phil Collins case”.^^ According to a Commission staff 
working paper,^® the joint application of these provisions leads, in principle, to 
protection throughout the Community of any work of which the author or one 
of the authors is an EU national who died less than 70 years before 1 July 1995. 
The same also holds for performers whose performances were published less than 
50 years before 1 July 1995. 



Director is to be considered as an 
author 



1 6 For further details Moier, ['harmonisation de la 
duree de protection du droit d'auteur et de 
certains droits voisins, Revue du Marche unique 
europeen 1 994, pp. 49 et seq.; Antill & Coles, 
Copyright Duration: The European Community 
Adopts 'Three Score Years and Ten', [1996] 
EIPR 379 etseq. 

17 Joined cases C-92/92 and C-326/92 [1993] 
ECR 1-5145. 

18 For details Caster, The European Commission 
Staff Working Paper on the Implications in the 
Field of Copyright and Related Rights of the Euro- 
pean Court of Justice's "Phil Collins" Ruling, RIDA 
No. 1 68, April 1 996, pp. 2 et seq. (6 1 et seq.) . 



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Member States were required to implement the Directive before 1 July 1995. 
By October 1996 11 Member States had adopted the necessary national regu- 
lations and another two had draft legislation pending. The remaining two might 
face ECJ proceedings soon. 

The Database Directive 

Directive 96/9/EC provides for the legal protection of databases in any form 
(e.g. electronic and paper form, on-line and off-line). Copyright protection is 
granted in accordance with Article 2 (5) of the Berne Convention and Article 10 
(2) of the TRIPs Agreement which was adopted in 1995 as a result of the Uruguay 
Round of multilateral trade negotiations. Thus collections of works and compi- 
lations of data or other materials are likewise covered. In addition, the Directive 
introduces a sui generis regime setting out to protect substantial investments in 
databases for a period of 15 years. 

The Directive harmonises copyright applicable to the structure (schema) of a 
database in line with similar provisions contained in the Computer Programmes 
Directive. Therefore, it prescribes the same level of originality as the eligibility 
criterion for protection (“the author’s own intellectual creation”). 

The rightholder has a number of exclusive rights: right to carry out or auth- 
orise reproduction, translation, adaptation, arrangement, alteration, any form of 
distribution to the public, any communication, display or performance to the 
public, etc. Optional limitations (exceptions) to the restricted acts are subject to 
an exclusive enumeration, taking into account the fact that copyright as covered 
by the Directive applies only to the selection or arrangement of the contents of a 
database. 

The object of the sui generis right is to ensure protection of any investment in 
obtaining, verifying or presenting the contents of a database for the limited 
duration of the right. Such investment may consist in the deployment of finan- 
cial resources and/or the expending of time, effort and energy. 

Restricted acts relate to unauthorised extraction and/or re-utilisation of all or 
a substantial part of the contents of a database. The right of the database maker 
to prevent extraction and/or re-utilisation is a new type of intellectual property 
right which may be transferred, assigned or licensed. 

The exceptions to the sui generis right are in line with the limitations under 
the copyright chapter. They relate to substantial parts only and do not include 
private copying of digital databases. 

The term of protection is fifteen years and renewable in case of a substantial 
new investment. The sui generis right is available to third country beneficiaries on 
the basis of reciprocity. Under those circumstances the European Community and 
its Member States have recently proposed the conclusion of an international 
convention of the sui generis protection of databases. 



1 9 For a detailed commentary Gaster & Powell, 
Legal Protection of Databases in Europe - A 
Guide to the EC Directive (to be published in 
1997 ). 



Investments in databases protec- 
ted for a period of 15 years 



212 



ECC 




The Directive’s implementation deadline is 1 January 1998. No implementing 
measures have been recorded so far. 

The Proposal on “Droit de Suite'' 

The purpose of the proposal for a directive is to harmonise the artist’s resale Artist's resale right 
right (droit de suite). 20 The artist’s resale right can be defined as the right of the 
author, or after his death of his heirs or other beneficiaries, to receive a percentage 
of the price of a work of art when it is resold. On the basis of the relevant provi- 
sion of the Berne Convention the proposed legislation determines the subject 
matter of the right. In this respect, provision is made for excluding private trans- 
actions between private individuals from its scope. Subject to the right shall be 
resale by public officers, auction houses, galleries or other commercial agents. It 
is suggested that royalties shall be payable on any transaction involving transfer 
of ownership of works apart from the first sale. Royalties should be payable on the 
sale price. In order to ascertain its effectiveness the artist’s resale right shall be 
inalienable and unwaivable. 

The proposal sets out to harmonise the categories of original works subject to Works of applied art excluded 

the right: manuscripts, pictures, collages, paintings, drawings, engravings, prints, 
lithographs, sculptures, tapestries, ceramics and photographic works. Works of 
applied art are excluded. An application threshold of a sale price of ECU 1,000 
shall be set. Member States would have an option to apply “droit de suite” from a 
threshold lower than the Community threshold. 

The Commission considers it would be appropriate to provide for a tapering 
scale of rates of royalty based on three price bands. The basic rate would be set at 
4 % of the sale price net of tax, the intermediate one at 3 % and the upper one at 
2 %. Member States would be free to determine the procedures for collecting and 
managing the right. Rightholders would enjoy a right to obtain any information 
that may be necessary in order to secure payment of sums payable under the 
resale right. Enjoyment of “droit de suite” would be restricted to EU nationals and 
foreign authors whose countries afford such protection (reciprocal treatment) to 
Community authors. 

The Current Consultation Exercise 



The Objective 

The Internal Market legislation described above constitutes the basis for all 
additional and complementary initiatives which might be required in order to 
address issues resulting from the emergence of the phenomenon of the “informa- 
tion society”. 

As a response to similar consultation documents published by the authorities of 
various countries and with a view to harmonising the different approaches at EU 
and international level, the European Commission published on 19 July 1995 its 



20 For a comparative law study concerning the situ- 
ation prior to the Commission proposal cf. Pier- 
redon-Fawcett, The Droit de Suite in Literory and 
Artistic Property, New York 1991. 



213 



ECC .• 




More than 350 submissions 



21 COM(95)382finaU 9.7.1 995. 

22 See Replies from Interested Parties on "Copy- 
right and neighbouring rights in the Information 
Society", Brussels/Luxembourg 1995 

23 For details Gaster, Copyright and Related Rights 
in the Information Society, in: Proceedings of 
the SOFTIC Symposium 1995 on Problems of 
Intellectual Property Rights in the Context of 
Information Networks, Tokyo 1995, pp. 227 et 
seq. See also von Lewinski, Das europaische 
Grunbuch uber das Urheberrecht und neue Tech- 
nologien, GRUR Int. 1995, pp. 831 etseq. 



Green Paper on “Copyright and Related Rights in the Information Society”.^^ The 
Green Paper had been preceded by a questionnaire on “Intellectual property in the 
Information Society” and was based upon observations made by interested parties^^ 
at a preliminary hearing which took place in Brussels on July 7 and 8 1994. 

With this document the Commission intended to consult extensively interest- 
ed circles, associations and authorities on the challenges to copyright and related 
rights which are brought about by the new technologies of the information age. 

Participants in the consultation process were requested to submit statements 
and suggestions in relation to nine different topics by 31 October 1995. In re- 
sponse, the Commission has received more than 350 submissions dealing with the 
issues which were identified in the Green Paper. 

The conclusions of the consultation process are set out in an up-to-date 
“Follow-up to the Green Paper”. This communication from the Commission 
identifies a number of issues requiring immediate action in order to eliminate 
significant barriers to trade in copyright goods and services and/or distortions of 
competition between Member States. Furthermore, it is concluded that other 
issues equally fundamental to the exploitation of intellectual property in the 
information society necessitate further consideration and/or action before 
concrete policy proposals can be made. 

The Hearing of July 1994 

As mentioned above, the European Commission s first phase of the consulta- 
tion process on the copyright and related rights aspects of the information society 
started with a hearing in July 1994. 

The hearing confirmed the first impression of the Commission services that 
the new technological environment does not ask for radical changes of the ex- 
isting regulatory framework. The establishment of the information society is an 
evolutionary and dynamic process which is far from being completed. It appears 
that there is no need for intellectual property rules which are technologically 
specific. Many interested parties indicated that national. Community and inter- 
national intellectual property right provisions could be adapted to adequately 
cover the new acts of transmission. However, it was felt that the need to agree on 
comparable standards of intellectual property protection has substantially risen. 

The 1 995 Green Paper - Issues Deserving Priority Attention 

Based upon the acquis communautaire the consultation exercise set out to 
identify the need for legislative action in order to avoid that the development of 
new services be hampered by fragmented markets or by the absence of an appro- 
priate level of protection. 

The Green Paper consists of two chapters.23 In Chapter one, the reasons for its 
need were explained, the issues at stake identified and a short description of the 



214 



methods of creation arising from 
digitalisation do not call substantially into question 
traditional methods of rights management/' 


•• ECC y 


existing legal framework in the European Union given. In addition, a number of 
preliminary questions were raised. In Chapter two, a rather detailed study was 
carried out of the possible implications of new technologies for the systems of 
copyright and related rights, discussing nine issues: 

♦ two general topics : - the determination of the applicable law and 

- the exhaustion principle (parallel imports); 

♦ several specific rights : - a digital reproduction right; 

- communication to the public; 

- a digital transmission right; 

- a digital broadcasting right; 

- and the issue of moral rights; and last but 
not least 

♦ two issues on the - the acquisition /administration of rights 

exploitation of rights : - technical systems of identification and 

protection. 

With regard to each area examined, a number of specific questions were raised. 


Possible implications of new tech- 
nologies: nine issues 


The Hearing of January 1996 

The importance of technical systems for identifying and protecting copy- 
righted works and other protected matter, as well as the need to rationalise the 
management of the rights within the framework of the information society was 
recognised by interested parties at a hearing organised by the Commission in 
Brussels on 8 and 9 January 1996. The hearing which focused on two specific 
chapters of the Green Paper was attended by more than 250 representatives of 
rightholders, industry, users, relevant international organisations, the EU 
Member States and various third countries. Various initiatives concerning the 
identification, protection and electronic management of the relevant rights were 
presented during the hearing. 

The vast majority of the participants agreed that these technical initiatives 
should be developed on a voluntary basis and be guided by market considera- 
tions. There was also agreement that the standardisation process should aim to 
achieve single standards recognised worldwide. Once these technical systems have 
been developed, legislative measures to protect their integrity should be adopted, 
indicated the participants. Sanctions for neutralising, violating or manipulating 
these systems should be established at the Community level. 

With regard to acquisition and management of rights, the participants agreed 
that new methods of creation arising from digitalisation do not call substantially 
into question traditional methods of rights management, but that interested 
parties should attempt to rationalise these methods where possible. In this 
respect, attempts to simplify and regroup the management of these rights are 
underway in several Member States. 


The aim is to achieve single stand- 
ards recognised worldwide 



215 



ECC 




Need for further harmonising 
efforts 



24 See also the conclusions by Heinz Zourek, 
Deputy Director General of the European 
Commission's Department for Internal Market 
and Financial Services, in; Proceedings of the 
International Conference on "Copyright and 
Related Rights on the Threshold of the 21st 
Century, Firenze, Italy- June 2, 3, 4, 1996", 
Brussels 1996, pp. llZetseq. 

25 Communication from the Commission "Follow- 
up to the Green Paper on Copyright ond Related 
Rights in the Information Society", Doc. COM 
(96) 568 final, 20.11.1996. 



The Florence Conference 

The consultation process was concluded by an International Conference on 
“Copyright and Related Rights on the Threshold of the 2P^ Century,” which took 
place in Florence, Italy, from June 2 to 4, 1996. The Conference discussed the 
preliminary results of the consultation, and established together with the written 
submissions the need for further Community legislation. The conclusions of the 
debate^^ were the following: 

★ Protection of IPR is key to added value and competitiveness in, for example, 
the entertainment and information sectors. 

★ Within the Single Market framework clear, harmonised rules should be estab- 
lished to protect the creation, production and dissemination of works and 
other subject matter in Europe, while balancing the rights and interests of 
different categories of right holders and users. 

★ No new concepts of IPR protection are needed to achieve the benefits which 
the new technological environment of the information society can provide. 
The substantive body of copyright law is still relevant, including rights of 
reproduction, communication to the public and authorisation of distribution. 

★ While the quality of digital copying and transmission and the open nature of 
networks facilitate copyright infringements, digitisation and interactivity 
present new opportunities for identification and controlling the exploitation 
of protected subject matter. The enforcement and management of rights 
therefore deserve particular attention. 

★ As the information society’s electronic environment is not bound by national 
frontiers, any harmonisation at EC level must take place in parallel with the 
establishment of appropriate minimum standards of protection elsewhere, in 
particular under the auspices of WIPO. 

The 1996 Follow-up to the Green Paper 

The communication on the “Follow-up to the Green Paper on Copyright and 
Related Rights in the Information Society” of November 1996^5 concludes that the 
consultation of interested parties has confirmed the need for further harmonising 
efforts, action that needs to be undertaken within the Single Market framework 
and be consistent with existing concepts and traditions. Such initiatives should 
not imply radical changes to the existing regulatory framework. 

Legislative action needs to adjust and/or complement the existing legal frame- 
work, where this is necessary for the proper functioning of the Internal Market 
and needs to bring about a favourable environment which protects and stimulates 
creativity and innovative activities across EU Member States. Europe’s tradi- 
tionally high level of copyright protection must be maintained and further devel- 
oped. At the same time, a fair balance of rights and interests between the different 
categories of rightholders and between rightholders and users must be ensured. 



21€ 



ECC .• 




Towards this end the communication announces that proposals will be presented 
shortly in respect of: 

★ The reproduction right. Harmonised measures will be proposed in order to 
define the scope of the acts subject to the reproduction right, including limi- 
tations to it, in so far as Community legislation is not yet in place. 

★ The communication to the public right, including the making available to the 
public of works in such a way that members of the public may access these 
works from a place and at a time individually chosen by them. Harmonisation 
would also have to deal with the limitations applicable to the right. 

★ The legal protection of the integrity of technical identification and protection 
schemes. Harmonisation in this field may to some extent be dependent upon 
the outcome of WIPO negotiations. 

★ The distribution right. Harmonisation would cover all categories of copyright 
works (at present the right is only harmonised in respect of computer 
programmes and database structures). EC legislation would (re-)affirm that 
exhaustion applies only to the distribution of goods and not to the provision 
of services, e. g. on-line services. 

Other issues such as a digital broadcasting right, conflict of laws in cyberspace 
and law enforcement, management of rights and moral rights are not (yet) 
included in the list of first priorities. According to the Commission, such issues 
still require additional study or evaluation. 

The WIPO Process and the Need for International Solutions 

Needless to say, a response from the European Union to the new technological 
challenges is not sufficient. The information society is by its nature global, and 
thus, as regards many of the issues, it requires global answers. The networks trans- 
porting information, works, data, etc. will easily cover several countries, if not 
continents. Imposing national borders to the acts of “digital transmission” would 
prove to be an extremely difficult task. Therefore, in addition to the harmonisation 
of copyrights and related rights at the European level solutions must also be sought 
in an international context. Such goals have now been achieved by a diplomatic 
conference which was convened by the World Intellectual Property Organisation Two new Wl PO treaties adopted 
in December 1996. On 20 December 1996 the conference adopted a new WIPO in Geneva 

Copyright Treaty and a WIPO Performances and Phonograms Treaty. A third 
treaty on intellectual property in respect of databases will be considered later on. 

Concluding Remarks 

1. An important degree of harmonisation of legislation providing for a high 
level of protection for authors and neighbouring rightholders has already been 
achieved in the European Union, 



Digital broadcasting right not yet 
in the list of first priorities 



217 



2. The subject of copyright and neighbouring rights in the information society 
has been reviewed through a very comprehensive consultation exercise 
recently undertaken by the European Commission. The concluding “Follow- 
up to the Green Paper” identified the need for specific new initiatives and sets 
out the Commission’s working programme in the field of copyright and 
related rights for the years to come. 

Multilateral negotiations have led to the adoption of new treaties which adapt 
the traditional international copyright and related rights system to the new chal- 
lenges of the information society. 



ECC 



Ulrich Watttnbe^ 



State Intervention - 
The Japanese Experience 



Ulrich Wottenberg 

Head of International Relations at GMD ■ 
Forschungszentrum Informationstechnik Berlin 
(German Society for Mathematics and Data 
Processing. Research Centre for Information 
Technology at Berlin). 

Academic training in natural sciences at Kiel ond 
Marburg Universities, Japanese language studies in 
Bonn and Tokyo. From 1 977 to 1 993 founder and 
head of the Tokyo liaison office for GMD and GID. 
Publications on computer science, information 
society, and the Japanese Science Information 
System. 



“1 rum I lie lieiiihls of mpid eauitmiic gnuvili in I he mid-sixties, 
I.ipaii hegan to look ahead and made efforts to understand future 

trends in teehnology, eeoimniyand society I’mm the beginning, 

there were several views on the Japanese road to the post- industrial 
society, hut they were imiUed by the term ‘johoka shakat', coined 
apparently hy Y. Hayashi. lohoka shakai can he translated in many 
ways, e.g. as in formalised society' or informal ion -oriented society' 
Hayashi actually detlned the term johoka ; informalised') as the 
important quality of products and services, their 'appeal' above 
their expected functionality," 



Introduction 


220 


Formulating the "Information-oriented Society" 


221 


Government Activities 


222 


Deregulation of Telecommunications in 1985 


225 


Further Steps in 1995 


226 


Towards the Next Century 


227 


A Third Way 


227 


A Sound Technological Base 


227 


The Gamble with FTTH 


227 


Non-technical Aspects 


228 


Mixed Feelings 


228 



21S 





Introduction 

The provision and use of information depends on the political and social 
structure of a country; Japan s political structure changed to quite an extent after 
World War II. It showed some continuity in retaining the Emperor and the basic 
system of a strong central government above 47 departments. But to ensure a 
democratic process of decision making and to restrict interference of the govern- 
ment with basic rights as intellectual freedom, changes took place within the 
government. In 1947 the Ministry of Interior was dissolved and its functions 
distributed among several governmental bodies. In 1949 the Ministry of Com- 
munication (established in 1895) was split up into a Ministry of Post and a 
Ministry of Telecommunication. In 1952 both ministries were merged again 
(MPT), but at the same time telecommunication business was brought into a 
separate organisation: NTT (Nippon Telegraph and Telephone) was established 
as a “public corporation”. And some months later, a separate organisation was 
established for international telecommunication, KDD (Kokusai Denshin Denwa). 

In broadcasting, Japan in 1950 adopted a dual system of public and private 
broadcasting. The Nippon Hoso Kyokai (NHK), originally established in 1926, 
went on as a parliament-controlled, user- fee based organisation with nationwide 
responsibilities. On the other hand, private companies were allowed to enter the 
broadcasting business. In principle, private broadcasting is restricted to a single 
prefecture, except in urban areas around Tokyo and Osaka, where the adjacent 
prefectures are served by the same company. 

The Ministry of International Trade and Industry (MITI) promoted compu- 
ter technology in a very effective way, relying on five major companies and several 
others. Governmental research was also pursued in research facilities such as the 
Electrotechnical Laboratory, established a hundred years ago, and others. When 
data processing led to more and more data communication, MITI advocated the 
liberalisation of telecommunication, not always in harmony with the policy of 



Minister s Office. It was established in 1956 to promote research and development 
of atomic energy, but later its spectrum was broadened, not only by taking up 
other large-scale research such as air and space or ocean technology, but also by 
taking care of the Institute for Physical and Chemical Research and other R8cD 
establishments, sometimes in conflict with the Ministry of Education, Science and 
Culture. It is of interest that the foundation of STA is related to the “Group of 
Seven Ministries’ Engineers”, which was organised before WWII by Dr. Shigeyoshi 
Matsumae (1901-1991), who was the first engineer to become director general of 
a bureau within the Ministry of Communication in 1941 . In fact this was the first 
time within the whole government, where persons with a background in law had 



MPT 



Most influential : the Science and 
Technology Agency 



Besides MPT and MITI, a third governmental body has to be mentioned, the 
Science and Technology Agency (STA), a quasi-ministry within the Prime 



220 



ECC 




a monopoly. After the war Matsumae and his friends advocated a stronger posi- 
tion of the government in technology matters and supported the foundation of 
the STA and some of the group took positions there. Matsumae himself later 
became president of the (private) Tokai University in 1967, which was soon ident- 
ified with his charismatic character. Another prominent figure in the circle around 
Matsumae was S. Yonezawa, the first president of NTT. He organised the “Japan 
Techno-Economic Society” (JATES) in 1966 to bring together R8cD people from 
industry. A study group of JATES, the “Future Research Operational Group” 
FROG recommended the establishment of a think tank, a proposal which led to 
the foundation of the “Institute for Future Technology” IFTECH. So telecom- 
munication administration was influential even outside its own business in 
contributing to the establishment of Japanese public R&D administration in 
general, and even today engineers from NTT play a significant role in the general 
Japanese scientific world. STA is of relevance not just for historical reasons but 
directly in communication, because it is in charge of the national air and space de- 
velopment programme which includes satellites. 

Formulating the "Information-oriented Society" 

From the heights of rapid economic growth in the mid- sixties, Japan began to 
look ahead and made efforts to understand future trends in technology, economy 
and society. Starting with ideas put down in the USA by Kenneth Boulding, Fritz 
Machlup and especially Daniel Bell on the “post-industrial society”, in Japan 
Tadao Umesao, Yujiro Hayashi, Reikichi Shirane, Seizuke Komatsuzaki and other 
thinkers discussed the future Japanese society. From the beginning, there were 
several views on the Japanese road to the post-industrial society, but they were 
unified by the term “johoka shakai”, coined apparently by Y. Hayashi. Johoka 
shakai can be translated in many ways, e.g. as “informatised society” or 
“information-oriented society”. Hayashi actually defined the term johoka 
(“informatised”) as the important quality of products and services, their “appeal” 
above their expected functionality. A narrower view emphasised the fact that data 
processing and telecommunications were merging, opening up new oppor- 
tunities. All these views led to the offering of advice: towards the industry 
concerning the products and services of the future, when everybody would own 
a telephone, a colour TV, a car; to the government, to promote emerging 
information technologies for the benefit of the society. 

A detailed proposal how to promote the information-oriented society can be 
found in a paper “The Plan for Information Society: A national goal towards the 
year 2000”. It was published in 1972 by the MITI related Computer Usage Devel- 
opment Institute with its director Yoneiji Masuda as a leading figure. The plan 
proposed a short term (five-year) agenda for immediate actions and a long term 
(ten-year) one for further steps. The five-year plan proposed a computerised city 
“Computopolis”, applications in health care, education and environmental issues 



Consenting advice: promote 
emerging information technolo- 
gies 



221 



ECC 






The Japanese government did not adopt the 
grand proposals of the Plan for Information Society. 




etc. Even a “Computer Peace Corps” aiming at Third World Countries was advo- 
cated. The budget was calculated as more than $ 3,000 million. The long term plan 
(1976-1985) had a scale of $ 65,000 million. It included among others measures 
to eliminate the problems of computerisation. Masuda asked for strong govern- 
mental leadership in implementing the plan, as market forces alone would be too 
slow to trigger this off 



Competing field trials for cable 
and optical fibre in 1 973 and 1 976 



Japanese writing a challenge for 
information processing ... 



Government Activities 

The Japanese government did not adopt these grand proposals, but neverthe- 
less promoted some of the ideas discussed. Upgrading TV in 30 million private 
households by introducing two-way cable TV seemed to be a good way of testing 
new services and new equipment while promoting participatory aspects of the 
information-oriented society. MPT and MITI rushed to set up organisations to 
plan quite similar field trials, a clear sign of the competition between both minis- 
tries. In 1973 both organisations merged formally, but in fact remained indepen- 
dent. The MPT-related project started its field trials in 1973 in “Tama New Town” 
near Tokyo under the name TAMA CCIS (Coaxial Cable Information System). 
The MITI plans for similar experiments at Higashi-Ikoma near Osaka were 
delayed by the oil shock at the end of 1973, when MITI funding had to be focused 
on energy- securing topics. MITI decided to switch to optical fibre technology and 
started the field trials in 1976 under the name “Higashi Ikoma Optical Visual 
Information System” HI-OVIS. Both tests were run over several years, their tech- 
nical feasibility was demonstrated, but their immediate impact was small. The 
Japanese government did not see the need to provide a coaxial cable system in or- 
der to promote this type of CATV, and private companies stayed with simple 
broadcasting technology. 

CATV is regulated in Japan in the following way: systems with up to 50 
receivers are free, up to 500 receivers MPT must be notified, and systems 
exceeding 500 receivers need a permit. CATV developed slowly in Japan in 
comparison to the USA and to Europe. These systems serve mostly rural areas, 
even large companies have less than 500 subscribers. The systems are engaged in 
retransmission of broadcasting, and original programmes are very limited. In 
1990 there were 238 systems with more than 500 subscribers, with substantial own 
programmes with just 1 million subscribers. Since the late eighties so called “city 
type” CATV systems have emerged, which offer more than 30 channels and extra 
services. Here department stores and private railway companies are involved and 
in 1994, 170 stations served 2 million subscribers. 

The development of a videotext system, promoted by the MPT and in Japan 
dubbed CAPTAIN (Character and Pattern Information Network), had to solve 
problems related to the writing system with its complex and numerous characters. 
This led to a transmission standard on a pixel-based standard in contrast to the 



222 



•• ECC .• 




European block-mode and the North-American vector-mode standard. This pixel 
mode was a burden in transmission and made high resolution graphics possible. 
Field tests began in December 1979, CAPTAIN was introduced (after a wait-and- 
see period) on a commercial basis in 1984. Its acceptance as an information-tool 
was as low as in Europe, but it is still used as a specialised information system with 
a high end version “HI-CAPTAIN” on an ISDN basis. NTT at that time favoured 
its own development, the “Video Response System” VRS. This system requires a 
broadband communication network, which was not available at that time, but 
which shows that NTT was already thinking of the next steps. 

Japan was an early advocate of digitisation of telephone lines and set up tests 
under the name ISN (Information System Network), which featured one 64 Kbit 
channel and a 16 Kbit channel for cost reasons. Later it adopted the international 
ISDN standard with 2 64-Kbit channels. Field tests were run at Mita city in the 
outskirts of the Tokyo Metropolitan Area. 

MITI did its business in promoting the “Pattern Information Processing 
System” (PIPS) project from 1971- 1980, a joint project of public and private R&D. 
There were no spectacular results at the end, but the project laid the foundation 
of display- and printing technology, fields dominated today by Japanese 
companies. MITI did start a spectacular project in 1982, when the development 
of a prototype of a “Fifth Generation Computer” was announced. With the “Insti- 
tute of New Computer Technology” ICOT as the central organisation, the ten- 
year project tackled the development of hard- and software for computers to be 
used not just as faster “number crunchers” but as “thinking machines”, which 
would make possible expert systems, machine translation of natural language etc. 
Prototypes of such machines were built, but their impact on commercial compu- 
ting was very small. This was not a drawback to the Japanese, as all over the world 
“traditional” computing, in spite of its shortcomings in computer architecture 
and programming models, proved to be still the best solution when all econo- 
mical factors were taken into account. 

Within the framework of STA several lines of satellites were developed, among 
them communication satellites (C-series) and broadcasting satellites (B-series). 
Rocket technology was first imported from the US, but from the end of the 
eighties genuine Japan-made rockets, the H-I and H-II series, were put into 
service. Development of broadcasting satellites started in 1973, in 1977 Japan got 
8 channels within WARC for geostationary satellites at 1 10 degrees East. In 1978 
the first satellite “BS” was delivered to a geostationary position by an American 
rocket. With a specially formed reflector, not only the main islands but also remote 
archipelagoes like the Ogasawara islands, 1000 km to the south, could be reached 
while keeping “overspilling” into neighbouring countries to a minimum. Regular 
service was started in 1984 with the BS-2, put into orbit with its own development 
the Nil rocket. So Japan became the first nation with direct broadcasting. The BS- 
2 had just two channels, so they were assigned to NHK for its two networks. The 



... and later the basis for world- 
wide display and printing tech- 
nology leadership 



223 



ECC 



^^People have to be encouraged to stay in the countryside.” 




follow-up, the BS-3, is equipped with three channels, one for the joint use of the 
commercial broadcasters. 

Broadcasting satellites were used from the beginning for test transmissions of 
High Definition TV programmes. The HDTV technology was developed by the 
NHK Research Laboratory together with Japanese industry from the end of the 
seventies. The system was ready in the mid-eighties, but it was a development 
ahead of its time. The US and Europe were not willing to take over the standard 
developed by the Japanese. Now in the mid-nineties digital TV is expected to take 
over, so what to do with the analogue MUSE system? Japan shows some stubborn- 
ness and is still promoting it. In November 1991 the High Vision Promotion 
Society was established; the opening ceremony of regular programmes was on 
November 25^^, which hence became “High Vision Memorial Day”. MPT set up a 
promotion programme by designating model High-Vision-Cities and providing 
interest-free loans for potential users. In 1995 there were 38 areas all over Japan. 
Of these, 33 areas (71 cities) have already introduced HDTV. From November 
1991 up to November 1994 nearly 10,000 hours were broadcast over 1,100 days 
with sports taking a third of the time, music, movies and documentaries taking 
the rest. Meanwhile commercial broadcasters were also participating, so broad- 
casting hours (daily 13:00 to 23:00 hours) were shared between NHK and private 
broadcasters. 

Satellites as an instrument for Satellite technology covers the whole of Japan at once, to promote regional use 

rural development of information systems and information. Several ministries within the govern- 

ment have set up special programmes. There is an urgent need to do this: people 
have to be encouraged to stay in the countryside or to go back to it after gradua- 
tion from college or university in order to ease the congestion in and around big 
cities. In the mid-eighties several ministries started promotional activities under 
fine-sounding names such as “Greentopia” (Ministry of Forestry, Fishery and 
Agriculture) or “Information Terminal” (Ministry of Transport). But only two 
plans remain active, the “New Media Community” (MITI) and especially the 
“Teletopia” projects under the MPT. The idea behind all these projects is to raise 
the economic and social level in smaller towns and rural areas. The main instru- 
ments on the MPT side are videotext and CATV, database systems etc. Step-by- 
step model cities were selected and non-profit organisations were established 
which started planning with governmental help. Within the Teletopia framework, 
about 130 cities were designated as model cities, 180 third sector companies were 
established. Governmental support comes in low-interest loans from the Japan 
Development Bank and others. Information systems process local information 
and keep contact with national information systems. The three existing “tele- 
ports” in Tokyo, Osaka and Yokohama are special cases which keep contact with 
overseas information systems. 

Besides these technical advances with varying results, the government was and 
is very successful in promoting the general idea of an information-oriented 



224 



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society. The “Month of Information”, October, is filled every year with exhibitions, 
lectures etc. on various levels from special workshops of experts to events for 
everybody. These activities started as early as 1972 and do a good job in propaga- 
ting the use of information- technology and services. Over the whole year the 
Government prepares (together with appropriate organisations) a whole series of 
annual white papers on computers, software, databases, computer auditing, new 
media, multi-media, telecommunication etc. These government publications are 
not given away gratis but are sold in the Government Publications Service Centre, 
its branches and in general bookshops. In 1995 the White Paper on Communi- 
cations was sold out in spite of its price of about Yen 3,500 (about $35). This year’s 
White Paper was also sold in CD-ROM edition. With its three parts “Status of 
Telecommunication”, “Trends in Telecommunication Policy” and a special part 
“Revolution of the Telecommunication Market by the advance of Multimedia”, it 
should find an equally broad readership. 

Deregulation of Telecommunications in 1985 

While experimenting with information systems and promoting the computer 
industry, general discussion on administrative reforms began in 1981, with the 
privatisation of NTT as its topic. After three years of discussion and spurred on 
by the breaking up of AT&T, reforms in the telecommunication sector became 
effective in Japan from April pt, 1985. NTT was not split up, but its monopoly was 
ended and competition was introduced. Under the new regulations, telecom- 
munication companies could apply for a Type I Communication Carrier licence, 
which would allow them to build and maintain their own telecommunication 
lines and to offer services on them. Type II Communication Carriers would offer 
services on leased lines. In 1985 five “New Common Carriers” (NCCs), three with 
earthbound lines and two operating communication satellites, got licences to 
offer nation-wide services, and many more carriers got licences to serve dedicated 
regions. Among the NCCs, Japan Railways and the Japan Highway Company can 
be found as partners, offering their already installed lines. Cellular phone compa- 
nies and companies offering paging services arose, and in 1995 some 126 com- 
panies were active in this category. Type II Communication Carriers are divided 
into Special Carriers, offering national and international services and General 
Carriers offering regional services, using lines leased from NTT or the above 
mentioned NCCs. Altogether 50 TYPE II Special Carriers and more than 3,000 
TYPE II General Carriers were active in 1995. For international telephone 
communication, KDD lost its monopoly and has to share business with two other 
companies. 

With deregulation, the organisation of the MPT changed accordingly. Three 
bureaus were newly formed: The Communication Policy Bureau, the Telecom- 
munication Bureau and the Broadcasting Bureau. The long standing division 
between wire-bound communication and wireless communication ended, the 



A key ingredient for the Japanese 
case: government-led public 
campaigns 



Policy not yet integrated 



225 



NTT has reduced its staff from 300,000 to 200,000 over 
the years - but the reduction is partly due to the establishment 
of more than 130 subsiduaries.” 

differentiation between telecommunication and broadcasting, however, stayed in 
effect. The Minister of Post and Telecommunication is advised by the following 
councils 

★ Telecommunication Council (established 1982) 

★ Radio Regulatory Council (established 1952) 

★ Telecommunication Technology Council (established 1985) 

These councils comprise representatives from industry, from the academic 
world and the general public. The largest and most important is the Telecom- 
munication Council with its subcommittees. The members are nominated for 
two years, to ensure transparency. Since 1985 they have included two representa- 
tives of foreign companies: one American and one European, who are active in the 
telecommunication business in Japan. The four subcommittees working under 
the council are for CATV, telecommunication policy, telecommunication opera- 
tions and for the field of data processing. 

The first two councils mentioned above not only give advice on standards etc., 
but must be consulted on the issuing of licences to telecommunication or broad- 
casting companies. 

Further Steps in 1995 

In 1985 NTT, in spite of discussions concerning a break-up, entered the new 
era untouched, and a final decision on its status was postponed for five years. After 
discussions around 1990, the decision was postponed for another five years. Other 
problems also remained. The classification of telecommunication carriers into 
Type I and Type II reflects the way of thinking in the eighties, when offering 
communication lines and offering VAN services could be seen as two different 
businesses with a need for different regulations. Still another area of concern is 
that of full interconnectivity. NTT is obliged to admit the Type I Carriers to its 
local networks, but negotiations on the access fee and other details are up to NTT 
and the interested carrier. The MPT will set up a solution when negotiations fail, 
but this allows NTT at least to delay the agreement. In any case, many people are 
convinced that NTT’s access terms are too high, based on too high operational 
expenses. NTT has countered these voices by reducing its staff from 300,000 to 
200,000 over the years. But the reduction is partly due to the establishment of 
more than 130 subsiduaries. 

With regard to MPT, licensing policy is criticised because it tends to obscure 
general market forces. Type I Carriers need a licence to operate and it’s up to the 
Ministry how many carriers are thought to be economically sound, leading to 
restricted competition. It is also not easy to take back a licence, a measure against 
sudden turbulence, if a carrier disappears. 



Licensing policy is obscuring 
market forces 




226 



ECC 




At the end of January 1996 it was decided to improve the transparency of 
approval procedures for Type I telecommunication carriers by preparing better 
explanations. Also, field of service restrictions (international, national, long- 
distance, regional etc.) were abolished. Leaving the telecommunication business 
will also be made less complicated. 

In February 1996, the Telecommunication Council finally made proposals 
concerning NTT and KDD. It proposed that NTT should be split up into three 
companies, one long-distance and two regional carriers. The target year for this 
event of change is 1998, but there will be other immediate steps. KDD, like NTT, 
is a company established by law and thus still distinct from its competitors. It is 
likely that this privilege of KDD will be abolished, because international tele- 
communication can be guaranteed otherwise. 

Towards the Next Century 

A Third Way 

Japan, from the beginning of its modernisation in 1868, has always been under 
the strong influence of the USA. Nevertheless it tries to maintain a “third posi- 
tion”, trying to keep up with the US way of minimal governmental interference 
and the European way of governmental regulations, which is close to the tradi- 
tional Japanese position. Such cultural aspects will always render Japan unique. 
Anyway, deregulation will continue steadily in Japan. 

A Sound Technological Base 

Very early on, Japan formulated ideas specifying the future society as an 
information-oriented one. Several ministries acted in a typically Japanese way (of 
competition and cooperation) to promote the information society. Direct promo- 
tion activities were not too successful, but the government could spread the 
underlying ideas, and the information industry developed smoothly. Japan is now 
the only country besides the USA with a full range of native information techno- 
logy, from embedded computers to supercomputers, from optical fibres to all 
kinds of peripherals. Japan is ready for digitisation of every kind of information 
including compression technologies. Digital TV from satellite has just started in 
Japan. 

The Gamble with FTTH 

The “information highway” slogan made its impression on Japan. MITI and 
MPT took it up and “Fibre to the Home” is again on the agenda, planned to be 
completed in the year 2010. As a first step, cities with governmental bodies and 
research facilities will be connected by the year 2000, serving 20% of the popu- 
lation. As a second step, all cities with more than 100,000 inhabitants will be 
connected by 2005, bringing the rate to 60%, until everybody is served in the year 
2010. Looking back, NTT was rather reluctant to go ahead with these costly 



227 



■■ ECC .• 



The Japanese information society 
30 years after 


investments, but the fear of allowing business opportunities to slip away, meant 
that plans were revised. Governmental funding is limited to interest-free loans. 

Non-technical Aspects 

So telecommunication technology advances, but if we think of the high expec- 
tations for the information society 30 years ago - more direct democracy, more 
exchange of information within the local community - the development went a 
different way. Information technology became indispensable in factories and 
offices, whereas the non-professional user restricts himself to practical applica- 
tions: saving time by using electronic transactions in shopping, banking etc. or 
using his mobile phone, leaving special use to the specialist. 

By having access to a larger number of channels, the consumer is getting more 
entertainment. How much more sophisticated information-on-demand will be 
paid for in Japan remains to be seen. In contrast to the sparsely populated US, the 
Japanese enjoy and find much live entertainment in their neighbourhood, singing 
“karaoke” style at the bar, where highly sophisticated laser disk drives are rotating. 
And after enjoying this, the Japanese can pick up a video-tape in a 24-hour shop 
on the way home. 

Mixed Feelings 

If we look at the economic figures in Japan it turns out that only few branches 
could expand their business: the Type I Telecommunication carrier and energy 
companies. Electrical/electronic manufactures increased turnover, broadcasting 
was on the looser side. By putting all the information together, we get a mixed 
picture of the future. Not everything will transform into information: there will 
always be a need for a nationwide physical transportation system etc. and appro- 
priate investments in those areas. This means there will never be enough funds to 
realise everything, neither in the public nor in the private sector. Politicians and 
consumers will always have to make choices. 




References 

MPT (Ed): Heisei 7-nenpan Tsushin Hakusho [White Paper of Communication], Tokyo: Okurasho, 1 996 Edition, ISBN4-1 7-2701 70-1 , 582 p. 3500 Yen 
Economic Planning Association (Ed): [Multimedia -ka no shinten to kokumin seikatsu [Advance of Multimedia and citizens' lifestyle], Tokyo: Okur- 
asho, 1996, ISBN4-] 7-402100-7, 237 p. 1800 Yen 

Wattenberg, U.: Das japanische Bildschirmtextsystem "CAPTAIN". In: Media Perspectiven 11/1980, p. 741-744 
Wattenberg, U.: Entwicklungen im japanischen direkten Satellitenfernsehen. In: Media Perspectiven 8/1983, p. 564-569 
Yamadori, Y. (Ed): JIPOEC Informatization Quarterly No 106: 1996 Telecom Reform, Tokyo: September 1 996 



228 



■■ ECC .• 



Hans J. Klelnsteuber/ Marcel Rosenteh 



Regulation In the USA - 
Lessons for Europe? 



riiL' adviMiry anniiiission's \v;is tkMr; LiviisidLring iliL’ 

prev ailing cuntusimi tJial existed in eummuniLatmii policy regard 
iiig media 'players' and media regular iorr. the advisory conniiission 
recommended further centralisation of'llie regulatory priaess " 




Hans J. Kleinsteuber 



Professor of Political Science (since 1 976) and Pro- 
fessor of Journalism (since 1 982) at the University 
of Hamburg. 

Academic training in political science at Freie Univer- 
sitdt Berlin and in Cambridge/Medford, USA. 
Research on media policies in Germany and in com- 
parative perspective (US, Europe, etc.), on media 
technology and global communication. Recent pub- 
lications include Die Massenmedien in Europa (Mass 
Media in Europe, with T. Rossmann and V. Wiesner, 
TObingen 1993), Europa als Kommunikationsraum 
(Europe as Communicative Space, with T. Ross- 
mann, Opladen 1 994), and Der Information Super- 
highway (editor. Opladen 1 996). German represen- 
tative of Euromedia Research Group (since 1 982); 
member of the Enquete-Kommission des Deutschen 
Bundestages zur Zukunft der Medien (Fact-Finding 
Committee on the Future of the Media, German 
Federal Assembly). 



Outlining the Challenge 230 

Deregulation and Re-Regulation; The 1 996 US Telecommunications Act 231 
Old Answers to New Questions: Patchwork Policy in Germany 233 

The Variety of Europe 234 

Regulatory Body as Referee 235 




Marcel Rosenbacli 

Media journalist in Hamburg. 

Currently working on his master's thesis about 
telecommunication policies in the US at the Institute 
for Political Science at the University of Hamburg. 



229 



ECC 




1934 act established the Federal 
Communications Commission (FCC) 



Integrative approach 



Outlining the Challenge 

The advisory commission’s message was clear: considering the prevailing con- 
fusion that existed in communication policy regarding media “players” and media 
regulation, the advisory commission recommended further centralisation of the 
regulatory process. This sounds very up to date, knowing of the recent debates 
about legislation in the fields of telecommunications, multi-media and broad- 
casting on both regional and national level. However, the advisory commission 
did not analyse the current situation in Europe, but had been appointed by the 
American President Franklin D. Roosevelt in order to investigate the situation in 
the United States in the early 1930s. 

Roosevelt referred the report to Congress, which - only four months later - 
passed the 1934 Federal Communications Act (FCA). Its contents largely reflected 
what had been proposed by the advisory commission. The Act, which in many 
ways was modelled on railway legislation, regulated telephone communication 
and radio broadcasting. Moreover, it established the Federal Communications 
Commission (FCC), a national authority with responsibility for all regulation 
involving media and telecommunications. 

This integrative policy approach seemed the most sensible at the time because 
the various constituents in communication technology and the communication 
industry were then relatively closely interwoven. The telephone monopoly AT&T, 
for example, was experimenting for years trying to invent and establish a kind of 
pay-radio modelled on pay- phones. Only later did AT&T decide to concentrate 
on programme distribution via their telephone networks. Although the number 
of influential media players grew significantly over the decades, which was largely 
the result of a further segmentation of the media system (one only needs to con- 
sider the cable and satellite networks), a solid basis had been laid with the estab- 
lishment of the FCA. It resulted in an integrative approach towards and under- 
standing of communication policy, involving both telecommunications as well as 
other media. 

What has been outlined above is still of major importance today. The advent 
of digital technology in the telecommunications sector has made the traditional 
groupings redundant. Before too long, broad-band information highways will 
integrate various services which, for the time being, are still distributed separately 
via telephone, cable and terrestrial networks. We witness the merging of formerly 
separate communication industries such as broadcast media, telecommunica- 
tions, electronic games and computers. 



210 



"jhe prerequisites for extensive 
deregulation were comparatively favourable 
in the United States.” 



ECC / 




Deregulation and Re-Regulation: 

The 1996 US Telecommunications Act 



In the early 1990s, and with the above developments in mind, there were calls 
from the industry circles concerned demanding a significant overhaul of com- 
munication legislation which had been in place for around 60 years by then. This 
was taken up by the newly-elected Clinton administration (which had received 
substantial funds for their election campaign from the communication industry) 
and resulted in the Democratsy extraordinary National Information 
Infrastructure (Nil) Initiative from 1993 onwards. It triggered off moreover a 
broad debate about issues of communication policy. The ultimate goal was to pass 
a new communications act. 

There existed a fairly broad consensus amongst the main participants involved 
in formulating the act and the direction in which policy was to head. Democrats, 
Republicans and representatives of the communication industry all agreed that 
creating and expanding the communication infrastructure was to be financed 
privately. Providing free access to the communication sector for all possible com- 
petitors as well as a “digital-free-for-all” policy was intended to create the necess- 
ary incentives for capital investment. 

The prerequisites for extensive deregulation were comparatively favourable in 
the United States. The communication sector has always been privately financed. 
Public monopolies, for example in telecommunications, had never existed. The 
remaining commercial monopolies could be found on a regional and local level: 
they were regional telephone companies (Baby Bells) and cable operators. In 
return for guaranteeing them a dominant market position, the markets on which 
they operated were kept separate by means of regulation: while cable operators 
were not allowed to provide telephone services, regional telephone companies 
were forbidden to provide long-distance calls and other information services. 
Something else they were not to take up was the manufacturing of receiving 
equipment. 

While there existed a consensus to remove these last remaining regulatory 
restrictions, a heated debate emerged concerning an adequate transformation 
from a regulated market to open competition on equal terms. In particular the 
various industries involved tried everything possible to ensure a favourable start- 
ing position in the opening communication market. To guarantee that, they did 
extensive lobbying and used PR techniques which, even in the US context, reach- 
ed unprecedented heights. In particular the financially sound Baby Bells did this 
with quite some success. It was largely down to their influence that a first attempt 
to rewrite the act failed in the last days of the Democrat- run Congress in autumn 
1994. Overall, consultations lasted for more than three years. 

Nevertheless, on 8 February 1996 President Clinton signed the 1996 Telecom- 
munications Act. Not surprisingly, the act was the result of many compromises. 



Broad consensus on private finan- 
cing of the communication infra- 
structure 



How to transform a regulated 
market into open competition 



231 



ECC 




The draft versions that had been passed in the House of Representatives and in 
the Senate (both were dominated by the Republicans after the 1994 Election) 
were even more deregulatory and industry-friendly than their forerunners of the 
103*'^ Congress. An agreement was finally reached when the mediating Con- 
ference Committee settled for a combination of both versions from the House 
and the Senate. The result was a settlement acceptable to all participants. However, 
it must also be regarded as agreement on the lowest common denominator in 
communication policy terms. 



Loosening of concentration regu- 
lation 



Since the new act is rather loosely knit, it seems likely that the US communi- 
cation landscape will return to the dark ages in the medium term. The basic mess- 
age is “everyone against everybody else”! Competition is to take place on all mar- 
kets that had previously been treated separately. Regional monopolies are as much 
a thing of the past as are cross-ownership restrictions. The new Telecommuni- 
cations Act extends the upper ratings threshold for national TV stations by ten per 
cent to 35 per cent; ownership rules for national radio networks no longer apply. 



However, it will take some time before the new Telecommunications Act will 
have removed all regulatory practices entirely. The regional telephone companies, 
for example, first have to comply with a competitive checklist before they can suc- 
cessfully apply for a licence to provide long-distance calls. One reason for having 
this checklist is to keep the entry requirements for competitors as low as possible. 
Looked at in its entirety, this new piece of legislation does not propagate a laissez 
faire attitude as radical as could have been expected considering earlier drafts that 
passed through the Republican-dominated Congress. On the contrary, it contains 
a number of re- regulatory elements. In particular, this involves universal service 
and its regulation, which has been kept comparatively detailed and flexible. A new 
board has even been established. The so-called Federal-State Joint Board consists 
of national and State representatives as well as one consumer representative. Its 
members’ task is to advise the FCC on matters concerning universal service. 



FCC position strenghtened 



Something else the new act does is to strengthen the FCC’s position. This is 
even more surprising if one considers that there had been calls from the 
Republican side to dissolve it altogether. At least until 1997 the FCC will play a key 
role when it comes to putting the 1996 Telecommunications Act into practice. 
The FCC has been given the task of formulating regulations in over 60 different 
areas. Since it can be assumed that the FCC’s members have a self-interest in the 
Commission’s survival, if only for their own sake, it seems likely that its members 
will make use of their strengthened position. 



Even if the label suggests something different, the 1 996 Telecommunications Act 
is neither a completely new piece of legislation, nor is it restricted to (de) regulation 
of the traditional constituents of the communication sector. It really is an overhaul 
- although extensive - of the FCA dating back to 1934. It picks up the FCA’s cen- 
tral idea: the integration of communication policy. This early direction taken by the 
FCA proves to be a golden opportunity in the advent of the digital revolution. 



232 



"ihis (1934) direction taken by the FCA 
proves to be a golden opportunity in the advent 
of the digital revolution/' 



ECC / 




Old Answers to New Questions: Patchwork Policy in Germany 

A look across the Atlantic makes the special situation in Germany evident. 

While everything in the United States seems to be well co-ordinated, the story in 
Germany is rather different. This concerns in particular the number of regulatory 
bodies and the layers of bureaucracy The reason for this is primarily the follow- 
ing unique situation: in federal Germany, broadcasting is regulated on the Lcinder- 
level, while issues of telecommunications are decided on a federal State level 
(Bund). 

Land (and Lander) refers to the state (and states) of the federal system in Germany, 
the central power being the Bund. All Lander passed Landesmediengesetze (state 
broadcasting laws) and created 15 Landesmedienanstalten {Land supervisory 
bodies) for their enforcement. All Lander came together to have basic rules for 
broadcasting written down in a Rundfunkstaatsvertrag (joint agreement of all 
Lander). Based on this Staatsvertrag a further body has been established, working 
on questions of public service broadcasting financing (KEF) and in 1997 a new 
one is being created that looks into matters of concentration (KEK). Broadcasting 
regulation is obviously highly fragmented in Germany. 

The German telecommunications law, passed in summer 1996, will establish 
a regulatory body on the federal State level {Bund). It operates under the auspices 
of the Ministry of Economics and has responsibilities for the telecommunications 
sector which is just being opened up for competition. Moreover, there were 
further disputes between the Lander and the federal State {Bund) regarding the 
regulation of new communication services. But there are even more complica- 
tions. The European Union, too, contributed its share of further regulations. 

Amongst others there are the EU’s television directive “Television without 
Frontiers” and directives for the liberalisation of the telecommunications sector. 

What seems like over- regulation in some areas also has its exact counterpoints: 
satellites in orbit positions to serve Europe, for example, are under no effective 
control at all. 

This list alone illuminates the fact that Germany seems ill-prepared for the Germany ill-prepared for the con- 

convergence of the digital age. On the one hand, new regulatory boards are still vergence of the digital age 

being established under the outdated presumption that separate markets will exist 
in the future. On the other hand, it appears as if the legislators are keen to re- 
establish old lines of conflict, such as those between the federal State {Bund) and 
the Lander or those between different ministries. Above all, a large number of 
regulatory bodies, supplied with authority and responsibilities in particular sec- 
tions only, will mean the following: 

* more bureaucracy 

* internal competition 

* less effectiveness in regulation as a result of the above. 



233 



ECC 




The Variety of Europe 



The European Union has pushed ahead hard to liberalise telecommunications 
as well as broadcasting markets and issued a number of related reports and direc- 
tives. But the system of Directorate Generals (DG) in the European Union is in 
itself organisationally split, sometimes based on complicated compromises 
between the member states, the European administration and individual com- 
missioners. Three of the DG s deal directly with telecommunication and/or media 
matters, the DG III (Industry, Information Technology and Telecommunica- 
tions), DG X (Information, Communication, Culture, Audiovisual) and DG XIII 
(Telecommunications, Information Market and Exploitation of Research) . As the 
DG’s assignments emphasise, DG III and XIII are mainly in charge of telecom- 
munications, DG III more for the “software”, DG XIII more for the “hardware” 
aspects. lointly they are responsible for the Information Society Project, based on 
the Bangemann Report of 1994. The DG X is concentrating upon the directive 
“TV without Frontiers”, MEDIA II and the 16 : 9 Action Plan. 



Introduction and regulation of 
digital technologies is split be- 
tween different authorities 



Britain 



France 



This short overview clearly demonstrates that no single authority is acting on 
the introduction and regulation of digital technologies in Europe. Furthermore, 
since the above-mentioned directive “TV without Frontiers” of 1989 was estab- 
lished, the EC/EU has claimed final responsibility for the regulation of trans- 
border television in Europe, but has left the enforcement to national regulatory 
authorities. As much of European TV-programming is of transnational character 
today, regulation has become increasingly difficult; certain fields like Direct- 
Broadcasting- Satellites (DBS, of the ASTRA and EUTELSAT-type) are not effec- 
tively regulated by any national or European authority. But DBS-transmission has 
become crucial for the introduction of digital television in Europe. In a similar 
way, national regulation exists one way or the other in all European states. We limit 
our analysis to some of the larger member states of the EU. 

In Britain, the privatisation of British Telecom (BT) led to the establishment 
of the new supervisory body Office of Telecommunications (Oftel) . It was estab- 
lished in 1984 and overviews the major players in telecommunications. Besides 
BT this is mainly Mercury. Regulation in the field of broadcasting remains separ- 
ate. In 1990 the Independent Broadcasting Authority and the Cable Authority 
were replaced by the Independent Television Commission (ITC), an institution 
that is supposed to regulate commercial actors only at “arm’s length”. This body is 
responsible for all types of transmission, including terrestrial services, cable and 
satellite. For the commercial radio sector, which is mostly local, another new body 
was created: the Radio Authority. 

In France, a decree of 1989 created the Direction de la Reglementation 
Generale (DRG). France Tdecom, still a public corporation, is now working 
under the supervision of the Minister for Post and Telecommunication and is 
subject to the oversight of the DRG. For broadcasting three successive bodies 



234 



•• ECC .• 




have been created: the Haute Autorite, starting in 1982; the Commission 
Nationale de la Communication et des Libertes, and since 1989 the Conseil 
Superieure de TAudiovisuel (CSA). The CSA, being entrusted with the preserva- 
tion of pluralism of means of expression, is awarding operating licences for use 
of the different terrestrial channels in French television, as well as positions on 
French DB-satellites and for cable networks. It also issues the licences required 
for running radio stations. In France, we find the traditional separation of tele- 
communications and broadcasting regulation as it can be found in many 
European countries. 

In Italy, media and telecommunications regulation are still separate, but the 
Supreme Court demanded an overhaul of present media legislation to be com- 
pleted in 1996. The Prodi government has presented proposals to introduce a 
single communications authority that fashions itself on the American FCC and 
includes telecommunications and broadcasting. Similar to the FCC, it is pro- 
posed that the president of this independent body is to be appointed by the gov- 
ernment, with eight further members being elected by Parliament. The authority 
is supposed to issue licences to broadcasters as well as to telecommunication net- 
works. This is the only model that openly refers to the American example and is 
clearly prepared for the digital future of convergence. But it is still in the stage of 
being shaped, and the government is meeting strong opposition in Parliament 
where Berlusconi - for obvious reasons - is showing little interest in any effective 
regulation. 

As could be expected, the European scene is extremely diverse. But the general 
impression is that the continent is not well prepared for the future. The German 
situation, based on a federal system with shared responsibilities on the federal and 
the Lander level, is clearly the most complicated and probably the most difficult 
to resolve in Europe. 

Regulatory Body as Referee 

The insight gained as early as 1934 by the advisory commission established 
under Roosevelt seems not to have arrived in Europe yet. Converging technologies 
and markets also require converging regulatory structures. The United States 
seems to be offering the right answer for the future with the FCC. 

Yet America is also leading the way in another respect. Regulation in Europe 
is usually interpreted as a kind of high-level supervision of economic activity. The 
Anglo-American roots of the phrase however are of a rather different nature (the 
phrase is even part of the US constitution). It connotes in particular that the body 
responsible for regulation should balance the often differing interests of the sides 
involved. Consequently, the regulatory body becomes a sort of referee whose pri- 
mary concern is to make decisions which are acceptable for society as a whole, 
rather than complying only with legal principles. 



Italy 



235 



■■ £CC .• 


''in prescribing outdated market structures 
and with the predominance of legalistic thinking above 
all we are not well prepared for the future." 


FCC constituted like a jury 


That is also why the FCC has been constituted as a jury or a collegiate body 
that is working according to legal and public requirements, while not consisting 
of lawyers or people from the legal profession. Its members are constantly con- 
fronted with competitors for licences, competing branches of the communication 
sector, TV stations and viewers voicing their complaints. Certain rules and the 
requirement to be accountable ensure that all decisions are subject to public scru- 
tiny. 

Especially in the digital communication age with its governing economic prin- 
ciples it is necessary to speed up the decision-making process and come to sol- 
utions which can easily be inspected and challenged, if necessary. To name but 
one example: in Europe, the EC/EU has invested more than a billion ECUs trying 
to promote the introduction of High Definition Television (HDTV). It all rested 
on questionable technological design and was not in the interest of programme 
suppliers, who had made their disapproval clear. This kind of industrial policy, 
instigated from the top, turned out to be a complete failure. All developments 
involving HDTV came to an abrupt halt in 1992. In the United States, on the 
contrary, the FCC invited applications suggesting different technical solutions for 
the realisation of HDTV Submitted suggestions were then tested and scrutinised 
by independent experts. After the tests had confirmed that a digital solution 
seemed possible, all interested parties participated in further joint research. 
Currently, HDTV is undergoing an experimental test phase in the US. Europe, the 
“early bird” as it had seemed earlier on, has lost the race for the introduction of a 
sound HDTV technology. 


Conflicts are going to increase 


Owing to the growing convergence, conflicts are on the increase in the digital 
age. To illustrate the significance, the following example that is currently under 
investigation by the FCC can serve as an indicator of the above assumption. The 
telephone industry is complaining that the Internet is being used increasingly for 
phoning. While telephone companies have to pay a certain levy, online providers 
are exempt from these payments. Readers are invited to come up with suggestions 
as to which regulatory body in Europe could (and would be entitled to) deal with 
this highly complex issue and find a satisfactory solution. 

We have to be aware of the fact that our backwardness (when comparing our 
situation with that of the United States) is not only of a technological nature. Seen 
in its entirety, the technological infrastructure in Germany is even more modern 
and more capable than is the case in the United States. What we lack is an under- 
standing of and a coming to terms with the far-reaching changes brought about 
by the digitalisation of all communication processes. In prescribing outdated 
market structures and with the predominance of legalistic thinking above all we 
are not well prepared for the future. 



236 



The Road Ahead... 



Afterthoughts 

Having carefully read and edited the individual contributions to this report, 
having pondered over the facts and figures which we have extracted from the 
wealth of data available from many different sources, having considered and dis- 
cussed many of the interesting and stimulating ideas, insights and analyses... 
what do we expect to happen? And more importantly, what do we want to 
happen, what do we want to work for in the future, putting forward our own 
visions, arguing for them and raising energy (and funds) to make them happen? 

During our discussions in the Council, such visions - some individual ones, 
some shared between several individuals, some collectively - have come up once 
in a while. They had to be put aside for this time, because of our prime objective: 
evaluating and discussing key trends and issues in the communication field, and 
sharing them with those people in the industry who want to include those aspects 
and views from communication science into their own deliberations and debates. 
Ours has been an analytical task, not a prescriptive one. 

This does not mean, however, that academics would totally abstain from 
having wishes and visions of their own. We are trained and expected to make clear 
distinctions between what we believe in and strive for as individuals and as 
citizens, and what we can analyse (or even prove) within the limits of our 
respective professions - but clear distinctions are different from limits of 
expression. In this sense, let me briefly share with you five elements of my personal 
outlook on the future of our communicative environment - some of them may 
differ in perception, others in the ideals behind them . . . but they can - 1 feel they 
should - be part of our future debate. 

A (Digital) Future for Television 

The eventual end of television - as we know (and love) it - has been one of the 
intellectually (and maybe economically) most fascinating predictions (George 
Gilder 1994). The debate around this set of arguments has yet to catch on in 
Europe, and those who get into it can expect great rewards. However, do we really 
want to accept this argument, and willingly allow the withering of the essential 
story-telling, entertainment role of television, the wealth of information available 
on different channels, and the most economical form of both functions we have 
yet developed? 



ECC .• 




A misconception of the role of digital television seems to be prevailing, and it 
may lead to missing chances embodied in this technology. The digitalisation of 
television can entail three main changes. First, there is the significant enlargement 
of transmission capacities - to mainly discuss this possibility in terms of adding 
programmes of the types we know will not utilise the chances: there can and 
should be new kinds of content, new forms of access to existing archives, and new 
technical qualities of the television experience. Second, digitalisation allows 
integrated services, adding radio and data streams to be broadcast alongside 
television signals (via cable, satellite and terrestrial channels), and making avail- 
able services of different degrees of interactivity and individualisation - the value 
added and, hence, the attractiveness of home shopping and home banking will be 
limited, but there are uncharted opportunities in a host of services combined 
around the needs connected to the private home. Third, digitalisation makes it 
easier to introduce forms of payment closer not only to the actual use, but also to 
differing preferences in television programmes as well as in interactive services - 
and there are chances of also funding new developments rather than of just 
cashing in on existing types of programmes. 

Television hardware will have a new stage of development connected to 
digitalisation. We already can see (in some cases already buy) some of this, with 
digital improvements to conventional sound and picture quality, and the use of 
the television screen for Internet services - additional value to the television 
viewer could be created by other developments. Let us forget about “set-top 
boxes” (particularly in case there should be more than one of them) and work for 
digital decoders integrated into new television sets. Let us do away with extra 
stand-by satellite decoders, too - what we need are television sets that accept any 
type of signal input, and allow us to chose easily between programmes and ser- 
vices regardless of their transmission channel. And let us revive the idea of a much 
better television picture - high definition television deserves a new chance in the 
digital age: resolution-independent digital production of movie and television 
material will enlarge the number and quality of available content, there will be 
room in the digitally enhanced transmission spectrum, and finally there is no 
reason why (in a strange but marked difference to high fidelity audio equipment 
and even car stereos) the upper end of home television enjoyment is relatively 
limited. 

The role of common standards for all these desirable developments is obvious, 
and if we do not want the delay and damage connected to prolonged exercises of 
futile and in many cases merely tactical competition, the issue of setting and 
regulating standards becomes unavoidable - and I suggest we carefully (and 
quickly) consider the US model for this case. 



238 



More than just the Internet 



Some fascination with the Internet, and some illusions connected to its use 
and its development, are less a phenomenon of observation and analysis but one 
of media exposure and mass psychology. Having said this, however, there is a 
need to consider three aspects which in my view are essential to the future devel- 
opment of the kind of dedicated communication (in Ulrich Lange’s words) made 
possible by interconnected interactive electronic services. 

First, defragmentation of Internet content and Internet use will probably go 
on, and it should be deliberately supported. It will be positive if and when the 
established media (with their reputation and credibility for reliable selection and 
interpretation of information) and maybe some new services attract a higher 
status and more intensive attention and use in the new communication environ- 
ment. In addition, defragmentation by new clusters of content organised accord- 
ing to specific functions and needs should be developed. 

Second, reorganisation of the Internet is mandatory. In addition to the intro- 
duction of pricing mechanisms, the development of Intranets and that of regional 
networks as well as of an European Extranet with European content should be 
forcefully supported. 

Third, the process of plurification of the traditional Internet (and some of its 
derivatives) should be actively supported. Reduplication of content on mirror sites 
will not only be necessary and useful to reduce traffic on the congested information 
highways. Like a new copy of a book in a different library, reduplicated content 
also creates a new context for this information - and copyright agreements should 
not hinder this essential function of the free flow of information. 

A Society of Inclusion 

There are two tendencies in some of the prevailing discussion which carry an 
unnecessary risk of the additional fragmentation of society: first, there is a 
fashionable concept of connecting future communication trends to future gener- 
ations (and future generations only), and secondly some strange emphasis on the 
establishment of “virtual communities”. 

While it is true that some important elements of multimedia have been devel- 
oped by young entrepreneurs, and while it is understandable that developers of the 
technology like to see their enthusiasm about its possibilities and the simple 
enjoyment of using it shared already by children, it is deplorable to watch the child- 
ish attempts of the generation which developed computers, digital transmission and 
(of course) even the Internet and the World Wide Web to appeal to the assumed 
tastes of the very young - they (and their preferences) will grow up, and we should 
admit to maturity. One economic benefit will be to recognise the market potential 
of the generation(s) above the age of 49, given up by most of the advertising indus- 



try, prematurely, I think, particularly considering new types of products and ser- 
vices. A second chance lies within what in Japan is called the “silver market”: in 
Europe, the number of people aged over 65 will grow by 1 1 million between 1995 
and 2010, while the number of those below 15 will drop by 6 million. This process 
will allow multimedia providers to serve the interests and needs of the elderly more 
than before, combining socially desirable effects with entrepreneurial chances. 

Our (justified) fascination with global connectivity and with the possibilities 
of modern communication for organising and maintaining communities has led 
to what I consider to be a misleading over-emphasis on virtual communities and 
virtual global villages. The processes of fragmentation of existing communities 
(from the personal to the regional to the national) are difficult enough to cope 
with in the real world - we do not need additional fragmentation by imagined vir- 
tual communities with their seduction to escape from the responsibilities of the 
communities that exist and which have to deal with real challenges and problems. 
Our efforts should rather be concentrated on strengthening and enhancing the 
role and the functioning of real communities by using available technologies and 
services - there are some good examples for this in Europe, they need support, 
and they should be taken as real models for the intelligent and beneficial use of 
virtualising technology. 

Productivity and Employment 

The issue of productivity and employment is closely connected to the society 
of inclusion. The threat of unemployment by increased productivity and by new 
technological possibilities for the international division of labour is a real, and - 
given the prevailing economic policies - immediate one. Two aspects, however, 
should be considered to put things into perspective. 

First, particularly for the growth and employment argument, it has to be kept 
in mind that there is an unavoidable systematic bias (‘systematic asymmetry' in 
my terms) in trying to balance negative and positive effects: chances for new jobs 
in new fields of activity are more difficult to predict than losses in mature indus- 
tries. The important aspect here is that losses due to productivity gains are 
unavoidable, while the creation of new employment depends very much on the 
speed of introduction of new products and services. 

Second, productivity gains in societies are generally not a threat, but a 
promise: more products for consumption (and there still are real needs even in 
European societies), less work and more time for personal and family desires - 
John Diebold’s visions of 1948 about the automated factory which have socially 
enlightened a generation of engineering students still hold true. The political and 
economic challenge then is a different one: to organise the economic mechanism 
in such a way as to avoid (or compensate for) the loss of skills, the loss of social 
participation and the loss of faith. 



Funding the Future of Communication 



All developments in television and in interactive services have to be funded 
one way or the other - investment in infrastructure, content production and dis- 
tribution will have to be decided on by commercial or public institutions, and in 
the end it is the individual in his or her role either as consumer and/or that of tax- 
payer who has to foot the bill(s). Compared to our present situation, the new 
communication environment will allow both a substantial increase in total invest- 
ment (and spending) on communication (hardware and services) and a new dis- 
tribution of cost between different consumers and within society as a whole. To 
discuss potential sources of funding, consider the varying effects of cost dis- 
tribution on development in general and for specific segments of industries and 
of society, and to decide on funding mechanisms will be at the core of 
communication development in the public, corporate and individual spheres. 

We probably agree on the new and important role of pricing, considering that 
both television and the Internet are still commonly perceived as basically free ser- 
vices. As we have mentioned, introducing and strengthening pricing mechanisms 
both in television and on the Internet will have three effects in economic terms. 
First, price differences will - as in other consumer-oriented industries - provide 
orientation and help decision-making thus probably leading to a reduction of 
information overload. Second, following the example of traditional media, some 
new services will be geared to providing screening and shielding functions (rather 
than additional content as such), thus creating new business opportunities. Third, 
the unavoidable exclusion of those people unable to pay can and should stimulate 
public debate on which television content, what kind of Internet access and which 
services on this system are crucial for the functioning of a democratic society. 

We will have to discuss “universal service” regulations more than we have been 
used to previously, and we will have to decide if and to what extent local, state, 
federal and European institutions should finance multimedia infrastructure and 
use in education and for public access to what is offered in information as well as 
entertainment. 

Our communication environments will be shaped and influenced by unex- 
pected progress in technology, by brilliant new ideas for useful services and 
products, and by wise decisions on shaping the development within the 
framework of societal objectives. Our role will be to keep engaged in this debate, 
to put forward the results of analysis - and to keep in mind that we, too, are part 
of the future to be shaped. 



List of Content 



About Facts & Figures 244 

1. The European Media Field 245 

1.1 General Trends 245 

1 .2 Advertising in Europe 249 

1.3 Regulations /EU Actions 257 

1.4 Convergence /Steps 266 

2. The Consumer/ Microeconomics 269 

2.1 General 269 

2.2 Consumer Spending 270 

2.2.1 Overview 270 

2.2.2 Per Capita 273 

2.2.3 Per Household 279 

2.3 Household Equipment 280 

2.3.1 Equipment in Households 280 

2.3.2 Spending on Equipment 281 

2.4 Preferences 285 

3. Publishing Industry 287 

4. Recording Industry 291 



5. Movie Industry 



295 



6. 


TV Industry 


301 




6.1 Overview 


301 




6.2 Revenues & Prices 


306 




6.3 Pay-TV 


308 


7. 


Interactive Television 


315 




7.1 General 


315 




7.1.1 Overview 


315 




7.1.2 Trials 


316 




7.1.3 Compression-Techniques 


325 




7.2 Economics /Forecasts 


327 


8. 


Internet 


331 




8.1 History /General Overview 


331 




8.2 Technology /Software 


334 




8.3 Users /Usage 


337 




8.3.1 Users /General 


337 




8.3.2 Usage Germany 


342 




8.4 Internet -Economics 


349 




8.4.1 Internet Revenues 


349 




8.4.2 Internet Advertising 


352 


9. 


Telecommunications /Computing 


355 




9.1 IT/ITC/TLC 


355 




9.1.1 General 


355 




9.1.2 ICT-Markets 


357 




9.1.3 IT/TLC-Markets 


359 




9.2 Telephony 


361 




9.3 Computing 


365 



ECC 




About Facts & Figures 



With more than 200 graphics and tables on the history, situation and outlooks 
for European media, this appendix for the ECC Annual Report is designed to 
serve three different interests: 

♦ It aims to serve business people, professional researchers and academics, 
politicians and consultants alike so that they can quickly retrieve relevant and 
current data from many different areas of the European media field. To this 
end, we submit the first broad collection of all media-related information 
available, from the TV industry to telecommunications, from consumer 
expenditure to Internet usage. 

♦ The data have also been collected in order to give journalists, consultants or 
strategic planners a reliable compilation of sources for their articles and 
reports as well as their own forecasts. 

♦ The Eacts 8c Figures appendix was also designed to underline the statements 
and conclusions of the authors in this report with more European data. 

By integrating Japanese and American figures we have tried to give the readers 
more opportunities to compare media developments in these economies with 
European trends. We have also tried to give data on historical developments as 
well as forecasts. By comparing more than one of these sources, the reader might 
sometimes appreciate the contradiction or the agreement of different data sources 
regarding a single topic. 

This appendix might not be fully comprehensive and not completely free of 
faults, regardless of how much effort and care we have put in. However, we hope 
that you will find some illuminating data and information that you might be 
looking for. 



244 



ECC 




1.1 General Trends 



1.1.1 The Changing Field of Communications 





Cerrent Itiets/long Term Trend i 


Condition 1 loc Medio 


Technology 


• Convff |Nce of technologies/ 


* Convergence of different medio 




DigrlKotion 

* Etecreosi in processing cost^ 


fields (Communkotiom, Computing, 
Content) 




Increase in processing capacitios 
* hiNwks nilh highir dota trons- 


• More odvoncod digitol content due 
to more capable technologies 




irnssion copocHm/AdvoiKed com- 


* Oevelogment of new meom of con- 




pression stondorils 


tenl production ond prosantotion for 
emerging new medkt 


Rtgebtieiii 


• Tekoms deregukifed 

* Cross-medio ownershfi eosed 


* Convergence of regidottom for 
drffirenl medio 

* Deaeose of telecommunkoHon costs 




* IfrteHictud property rights under 
revtsion 


and better services 
* Development of (tronsfloHond) 




* Primy hsues/Oyptography 


regulating tools for riw Internet 




stondords 


might occur 


Ecoffotny 


* Growth oil X per yeor 

* Rising unemploymenl 


* Only smol steps possdrie to develop 
totoRy new rmrlcets 

* Risang pirrrhosing power, but not in 




* Ongoing rotionolHolion 
{dio vdiHe-collor job) 


oil segments of society 


Dfmegra|iby 


* SigniFkondy ogeing population 


* Media content (ond odvertising) to 
be designed espedoly for the needs 




* Professioml iNis of women 


of the ilderfy ond sint^ 




* Indfvtducilisation of life {the ont^ 


* Rising electfonk midto htercKy and 




pofson-householdl ond bfoslylts 


competonce of users 




* PC Irterocy of youths 


* PC and Internet usage moinly con- 
centrated on younger target groups 



The environment of the media 
industry is changing rapidly. Tech- 
nological convergence, deregula- 
tion, a slow down in economic 
growth and an aging population 
put the media under pressure to 
react. 



Sources 

l . l . l European Commission ( 1 996) ; Electronic 
Publishing; ECC (1 997) 



245 



ECC 




After recovering from the reces- 
sion in 1 993 and the less than suf- 
flcient GDP-figures of 1996, 
Europe should be looking forward 
to 1997 with projected GDP 
growth rates of about 2.5 percent. 



1.1.2 Comparison of Nominal and Real Growth Rates of GDP 

Figures for 1 996 and 1 997 are forecasts; percentage change compared to 
previous year 

iidfrtwtbtieOF IMmiI pMrtb tf GOf 





IW 




tffS 


IfH 


\m 




19W 


IffS 


\m 


1W7 


Avttrk 


B.4 


3.0 


It 


0.0 


L5 


3.7 


4,5 


40 


2.5 


32 




11 


2.2 


l.f 


1.0 


2,4 


2.4 


4.9 


4.1 


3.1 


4.5 


EMmmiI 


11 


4A 


24 


t.l 


17 


2.2 


4.1 


4.3 


34 


5.4 


FiiM 


-1.2 


lA 


4.2 


14 


35 


1.2 


5.5 


1.1 


3.9 


5.2 


Fr«K« 


1.3 


2,1 


2.2 


1.0 


2.4 


1.1 


4.4 


3,9 


2.0 


3J 


Gif— y 


1.2 


2,f 


11 


0.5 


2.4 


24 


5.2 


4.2 


11 


31 


GfMCt 


10 


11 


2.0 


12 


2.3 


12.9 


12.4 


11.5 


9.9 


t.t 


IriM 


3,1 


4.4 


2.7 


4.9 


5.0 


7.3 


2,4 


9.2 


7.4 


4.5 


Italy 


1.2 


2.2 


3.0 


1.2 


13 


31 


5.9 


1.0 


4.1 


5.5 




0 


3.3 


3.2 


1.9 


3.0 


4J 


5.2 


41 


3.9 


4.9 


-1-- J- 

ntmfWMi 


0.2 


2.J 


2.4 


1.4 


2.4 


2.3 


5.1 


44 


19 


4.5 


Ptrtafil 


-1.2 




2.5 


13 


2.2 


4.2 


4.4 


tl 


4.4 


4.5 


SijMilR 


-1.2 


11 


3.0 


13 


2.2 


3.1 


4.1 


7.9 


5.2 


5.7 


Svfi4ai 


-2.2 


14 


3.0 


1.3 


2.0 


03 


5.5 


7.2 


2.9 


41 


UK 


2.3 


3t 


2.4 


12 


3.0 


54 


5.1 


4.1 


4,5 


5.3 


Iwrw^am Uiilia 


-0.5 


21 


21 


1.4 


15 


3.1 


5,4 


5.5 


39 


4.2 


Clod 


n/t 


Zi 


41 


5.4 


51 


n/t 


14.0 


14.1 


17.2 


12.0 


florwiy 


11 


5.2 


3.7 


4.2 


14 


4.2 


40 


4.2 


4.7 


4.4 


UoHtA Sltlti 


22 


3.S 


2.0 


2.3 


10 


4.9 


51 


4.5 


44 


4.3 


J— 


0.1 


0.5 


O.f 


2.2 


14 


0.0 


O.t 


03 


1.9 


2.7 



Sources 

1.1.2 OECD (1996) 



246 



' £ cr / 




1.1.3 General Media Related Data, 1994/1995 



C—frT 


TttdiMiibif 

ifH \m 


1 

1994 


1995 


IiAiHn rati 
0i%1 

1994 1995 


JUftria 


j,m,m 


1 , 029,717 


3,030 


3,013 


30 


2.2 




10 , 045,000 


10 , 130,574 


4,315 


4,315 


2.3 


1,5 


OtMMriE 


5 , 110,600 


5 , 215,000 


2,339 


2,339 


U 


2.2 


FM 


5 , 071,000 


5 , 117,000 


2,145 


2,141 


0.0 


I.Q 




55 , 027,300 


50 , 265,352 


22,390 


23,010 


1.6 


2,1 


Gmmwmf 


11 , 410,000 


01 , 642,000 


32,030 


33,470 


3.0 


1.1 


GfMft 


10 , 420,000 


10 , 512,000 


3,340 


3,000 


10.9 


13 


triM 


3 , 562,000 


3 , 513,000 


1,067 


1,100 


2.3 


27 


iidr 


57 , 700,000 


57 , 190,000 


20,267 


20,263 


5.7 


25 


lauwfctiri 


400,900 


412,600 


145 


155 


2.2 


1.9 




15 , 341,533 


15 , 424,122 


6,350 


6,510 


2.7 


20 




9 , 371,000 


9 , 371,000 


3,045 


3,045 


6.0 


4.1 


Sfdi 


39 , 433,900 


39 , 433,900 


11,007 


11,155 


43 


4.3 


SwWm 


t, 745.100 


0 , 745,109 


4,140 


4,131 


3.3 


1.4 


UK 


57 , 063,000 


57 , 139,000 


22,950 


23,902 


2.5 


3.2 


tUktil 


366 , 570,000 


370 , 140.000 


140 J 41 


143,049 


n/i 


it/i 


Ivlfork 


1 , 500,000 


1 , 100,000 


2,965 


2,965 


96.0 


33.0 


a«di R«p. 


10 , 300,000 


10 , 300,000 


4,104 


4 , IN 


10.5 


9.1 


Hasfory 


10 , 260,000 


10 , 190,000 


3,073 


3.940 


110 


2 tJ 


Htrwty 


4 , 324.577 


4 , 340,410 


1,769 


1,769 


4.4 


1.5 


PtM 


31 , 590,000 


3 t , SI 4,(»0 


12,020 


12,020 


295 


21 i 


Kitiia 


141 , 000,000 


141 , 300,000 


45,300 


46,400 


230.0 


140.0 




6 , 961,500 


7 , 006,100 


2,936 


2,969 


n/a 


1.5 


UkftiM 


51 , 100,000 


51 , 600,000 


17,027 


tv/o 


501.1 


112.0 


m 


249 , 200,000 


264 , 557,000 


97,060 


90,610 


2,2 


2.4 


iapai 


125 , 150,000 


125 , 569,000 


43,666 


44,240 


0.7 


4.1 



Advertisement spending per capita 
in the U.S. is three times as high as 
in most European countries. Thus, 
further growth appears possible in 
Europe. 



Sources 

1.1.3 IP-Group (1995), ECCcdcutos (1997) 

* Advertisement spending per capita in 
Switzerland does not including direct mar- 
keting. 

** Drops can be attributed to exchange fluctu- 
ations. 



247 



1.1.4 Media Expenditure: Growth per Year in the U.S. 1990 - 1999 



ECC / 




Subscription video services and 
the music industry are expected to 
enjoy the highest growth rates in 
the U.S. media industry till 1999 
with compound annual growth 
figures between 8.3 and 9.4 per- 
cent. 





6fwt 

kslSZ 

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kamd ptwrii rttM k % 

\m itfi im mj mo 


Gmi 

•iftiahvt 


kmmd fnwHi fttn hi % 
iffi im 1117 im iw 


6ms 

■JtpiiJliri 

bSaflMM 

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frtwA(ii%} 

tflt-1ff4 


■MUil 

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TiWvMM ■ttwffi.i 


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5,0 


33 


7.5 


-00 


15 


1107S 


11 


17 


-0.0 


4.7 


11 


to,eoo 


3.0 


41 




I4.1U 


15 


t.2 


iS 


3.t 


lOJ 


17,070 


57 


7.1 


31 


44 


4.3 


33,500 


3.7 


Si 


TfWvHiM IrvWimtIPi 




0.7 


Si 


it 


37 


ft 


7f,005 


11 


14 


u 


4,7 


43 


37,550 


1.4 


5.3 


Riatwhiwikt 


m 


1.3 


1.7 


13.5 


1.0 


11 


ots 


IS 




11 


3.7 


4.3 


400 


01 


1.1 


RiAt iti4lHi 


?.I4? 


5.1 


3.1 


3.1 


f.3 


If 


f.aoo 


14 


43 


7.3 


5.0 


1.0 


13,105 


4.5 


7.7 


RfAi Im4nftip| 


1.373 


01 


3f 


7.1 


13 


If 


lO.TtS 


13 


5.7 


7i 


53 


71 


11505 


11 


71 


Ink Mrvkti 


1.1» 


111 


I3J 


1U 


13.3 


0.1 


15.500 


7.1 


1.1 


4.7 


14 


5.1 


31135 


11.3 


7.3 


dbHHk 


S.WS 


0.S 


30 


1.0 


iO 


11 


5,701 


II 


15 


10 


IS 


7.1 


7, ns 


0.1 


17 




77 


37-3 


ooa 


333 


370 


73.3 


TtJ 


743 


31.5 


75.1 


754 


30.1 


1,001 


31.0 


71.7 


JUfirtWaf 


1,577 


17.7 


IS 


11.3 


11.7 


10.3 


1130 


111 


11.5 


11.3 


10.4 


10 


0,150 


13.1 


11.1 


SdnolpftM vMh HTYkis 


15,715 


10J 


15 


li 


13 


3.1 


30,071 


1.7 


10.0 


1.1 


71 




34,111 


II 


1.34 


R«»rM mmk 


«,SI0 


10.1 


3! 


IS? 


11.3 


30.1 


iioa 


111 


5.0 


11 


10.4 


1.7 


11,114 


111 


1.4 


Ni 


5.033 


0.7 


10 


1.0 


5.1 


OJ 


5,31i 


01 


17 


51 


0.1 


0.0 


1170 


1.0 


17 


Hmh vMh 


i.m 


17.7 


53 


1.1 


17 


7i 


10,071 


1.3 


5.7 


7.7 


5.0 


5.3 


1 1,100 


14 


11 


TtiwIilM yi|r— II 


7.W5 


3.5 


0.0 


30 


13 


5.1 


1.353 


13 


41 


7.1 


7,0 


4.1 


11,105 


35 


11 


itrttr ifflAoitlM 


1,001 


10.0 


13.0 


f.3 


15.0 


10.1 


1.735 


11 


7.7 


IS 


li 


5.1 


1375 


11.5 


15 




73,353 


it 


11 


5J 


7.0 


01 


71,513 


13 


0.1 


II 


5$ 


5J 


31,054 


5J 


51 




77.JH 


- 


- 


- 


- 


- 


100,111 


- 


- 


- 


- 


- 


141140 


- 


- 



Sources 

1.1.4 Veronis, Suhler & Associates; Wilkofsky 
Gruen Associotes/The Hollywood Reporter, 
August 1995 



248 



ECC 




1.2 Advertising in Europe 



1.2.1 Advertising Spending per Year 

Figures for 1 996 are estimates 



Oif lAnrlliliii 

QialbfllSS) 





\m 


1W 


tff4 


IW 


ms 


Itfi 


MfllH 




131.114 


145,130 


1,411.1 


1,5C«.I 


1,410.7 


Clidi Rip. 


vm 


40.004 


41,114 


3011 


3401 


mi 


fr«K* 


M2SJM 


1,414,452 


1,435,441 


1,124.4 


1,343.1 


1,451.5 


Gifqr 


1,145471 


UU041 


1,145,514 


11,751.4 


11,7314 


20,140.5 






34,513 


34,414 


314.1 


3541 


454.3 




tSA.119 


157,451 


071,745 


5,504.1 


4,0311 


1,3043 




lt,757 


11,105 


11107 


100.5 


74,7 


10.4 


II ifc 1 ti hI 

nVpHiHM 


3I4>3I 


344,351 


373, 4U 


imt 


3,111.1 


3,3141 




n,OI4 


15,503 


101,134 


511.1 


455.1 


744.1 


Pirti|d 


MHS 


41,141 


70,444 


417.1 


513.5 


544J 


SkvikiHl. 


1,™ 


1,113 


1,441 


71.4 


17.1 


W.7 




451.073 


451,734 


444,111 


4,3ftS 


4,414.! 


4,tHI 




lf3,5Sa 


111,353 


114,001 


1710.5 


1147 


1,1714 


IM 


tt5,1lf 


tH,4IO 


103,144 


1,314.7 


1.440 0 


10,3411 


USA 


1,304,011 


1,311,540 


1,401,141 


04,154 5 


13,4015 


100,1405 




5,131,157 


5,474,140 


S,7H.00Q 


44.1123 


31,373.1 


40114.1 



GOP^dpNi eiipaiHMiipllt pvotNfi tf li 

um mm nm 



im 


IW 


IW 


IW 


im 


IW 


IW 


IW 


IW 


13,144.5 


13,155.0 


14,403.4 


140.70 


141.50 


i5in 


051 


ou 


044 


3,111.5 


3,tl4l 


4,070.3 


11.41 


3310 


37,70 


0.13 


0.17 


0.14 


15,047.3 


24,375.0 


14,741.4 


14114 


141.20 


14440 


0.45 


0.44 


047 


14,1114 


14,071.0 


?4,U0.4 


147.W 


14100 


241.30 


011 


013 


013 


3,150.1 


3,551.4 


3.451J 


30.01 


35.10 


44.10 


0.14 


0.10 


1.14 


15,110.1 


14,1403 


15,1444 


17.12 


10530 


101.10 


0.44 


0.70 


0.72 


H,3fl,1 


21,447 4 


30,440.4 


150.50 


1H.I0 


MIO 


0.05 


045 


0.44 


14,144.1 


23,741,7 


14,343.1 


mn 


201.00 


ni.D0 


0.1} 


0.17 


0.11 


1,370.5 


M7S.1 


1,413.4 


1140 


14.n 


1150 


0.54 


o.it 


074 


4,5W-7 


7,1031 


7,517.1 


44.01 


54.40 


50.50 


073 


075 


077 


1,717.1 


1,457.5 


1,740.7 


13.40 


I5.U 


15.40 


0.11 


0.14 


OH 


11,541.4 


1M554 


11,1211 


111.54 


111.40 


m.» 


0.17 


1.04 


).05 


43,0411 


41.523.3 


41477.5 


400.70 


401.10 


117.70 


0.15 


m 


1.01 


15,1121 


15,441.7 


15,131.1 


147.50 


14100 


100.70 


104 


].m 


U4 


14,1447 


15,311.1 


14.01U 


331.31 


374.« 


444 30 


1.37 


1.41 


1.55 


44,441.5 


453311 


44 335.1 


341.14 


314.40 


324.30 


0.71 


041 


1.70 



Sources: 

1.2.1 IP-Group: Status Report (1995U1 996); 
ECC calculations (1997) 

Note: The exchange rate in 1 994 and 1 995 
was 1.34 US$ per ECU, in 1996 only 
1 .30 US$ per ECU. Hence the growth of the 
GDPs in ECU appears stronger than in US$. 



249 



ECC 




Sources 

1.2.2 IP-€roup: Status Report (1995), (1996); 
ECCcalculotions (1997) 

Note; The data is based on exchange rates 
which may vary between 1 995 and 1 996. 
(1994 and 1995:1 ECU = $1.34; 1996: 
1 ECU = $1.30) 

National data standards: Belgium: gross / 
excl. classifieds; Czech Hep.: Cinema data 
includes other outdoor advertising; France: 
excl. classifieds; (9e™y;net/incl. classi- 
fieds; Hungary: gross / inch classifieds; 
Italy: net / excl. classifieds / including 
agency comission; luxembourgh: gross / 
excl. classifieds; Netherlands: net / incl. 
classifieds; Po/onc/: gross /excl. classifieds; 
Portugal: excl. classifieds; Slovakian Pep.: 
gross / excl. classifieds; Spain: gross / incl. 
classifieds; Switzerland: net of discount / 
including agency comissions / excluding 
classifieds; UK: gross / incl. agency comis- 
sions / excl. classifieds / excl. production 
costs (except outdoor and cinema advertis- 
ing) ; USA: net / incl. classifieds / ind. agency 
comissions; Japan: gross / ind. classifies 

* Figure does not include specalised journals. 

** Figure includes radio advertising, but 
excludes local cable TV advertising. 



1.2.2 Advertising Spending per Year and Market Shares 

1 994 - 1 996; in million US$ and percent 

l«M TffS 







fm 


W 






























ins 


IHJI 


4411/ 


m 14 


mp 


14 II 


M! It 


Hill 


lot] 


IM44 


nu 


WO 


SUM 


17171 


14117 


no 




% 


411 


Ml 


11/ 


•/ 


II 


441 


Ml 


III 


tt 


II 


Ml 


ISI 


M/ 


11 


IS 




ms 


mv 


MSI 


1717 


im 


!•* 


lit 14 


Uill 


nil 


an 


744 


1710 


1410 


4tM 


MM 


IM 




% 


mt 


HI 


II 


/I 


It 


4U 


Ml 


t| 


IJ 


n 


414 


HI 


Mi 


7/ 


14 


tw 




ini/i 


1,171*1 


inn 


1741 


4MH 


un/7 


1.IM4I 


Tvn 


sso 


4.11414 


1S1SI4 


1.141 11 


IMH 


HO 




% 




HI 


171 


11 


14 


411 


Ml 


111 


14 


II 


OJ 


H4 


114 


7J 


14 


ft— 9 






Uill 


mu 


mu 


1.17711 


4.I4IM 


411 71 


7ft 44 


IMO 


1.IIB4 


iwa 


U4M 


•IMS 


Mist 




% 


nt 


Mi 


11 


41 


II 


711 


lit 


11 


4t 


If 


JtJ 


III 


11 


41 


II 




ms 


■ran 


171 n 


1*H 


HO 


10 


mv 


IHM 


III! 


1*41 


IN 


ItlJl 


1MH 


HO 


1/! 


10 




% 


m 


m 


41 


/I 


11 


HI 


411 


SI 


11 


11 


4?S 


41S 


U 


IS 


11 




ms 


IWH 


HIM 


HIM 


17JI 


vmm 


un7f 


ni4i 


mu 


ItJI 


IIIIJI 


lH4tl 


H1U 


H4II 


till 




% 


m 


ni 


41 


11 


U 


Ml 


11! 


41 


14 


11 


MJ 


D4 


41 


It 


IJ 




IHII 


III II 


1410 


IlH 


UMO 


0414 


IStM 


IH7I 


IlM 


USIO 


7S7I4 


IMM 


I/IB 


4M 




% 




HI 


47 


47 


14 


144 


r 1 


41 


41 


II 


04 


US 


V 


II 


IJ 




ms 


V7J 


IMt 


IM 


im 


■ 


ini 


1114 


IJH 


im 


- 


1174 


IH4 


tm 


lOJ 


- 




% 


AT 


Hi 


14 


4/ 


- 


Hi 


Mi 


11 


41 


- 


Vi 


4lt 


1/ 


!l 


- 




ms 








it/1 


- 


mil 


tl4Jl 


11 M 


MM 


- 


IVV 


mi 


11 II 


MM 


- 




% 


PI 


MJ 


li 


14 


- 


m 


III 


II 


14 


- 


Ml 


411 






- 




ms 


liA 


An 








BA 


MM 


IM 


U\ 


lO 


VB 


BM 


so 


IN 


IH 


lipifcli 


% 


UJ 


IM 




1! 


li 


III 


Ml 


II 


14 


11 


417 


Ml 


/s 


III 


II 


Mi 


ill mm 




MM 


iHfl 


1717 


uno 


1/7114 


mis 


44711 


MM 


UMJI 


IJII44 


mo 


47IM 


MIS 




% 




PI 


4J 


41 


IJ 


4/1 


B/ 


44 


li 


41 


441 


Ml 








ipmm m tiiiji 


mu 


MH 


71T7 






iHir 


M4t) 


7l« 


Mil 


1/4144 


ran 


HSM 


HO 


VV 




% 




a 


11! 


11 


II 


ns 


14 


Hi 


1/ 


It 


7!/ 


14 


Ifl 


17 


14 


111 


m 


itnii 


mp 


mn 


14 M 


44tlM 


4.HI 41 


MS /I 


4MM 


41/4 


wm 


imm 


4HI1 


0147 


f/M 




% 




i!/ 


II 


1/ 


it 


441 


Ml 


41 


44 


II 


Ml 


41 1 


I* 


41 


14 


ml 


ms 


4UM 


KW 


1.III 


MJH 




4IBI 


MHI 


IN* 


11.MI 


- 


oar 


our 


- 


*■ 


- 




% 




Vi 


11 


111 


- 


44/ 


Vi 


II 


MJ 


- 


- 


- 


- 


- 


- 


hpm 


m w.wi 


ifim 


kmm 


14H1* 




lifliJ 


I4JI41 


1.4a/} 


UnH 


- 


IS.HSI 


17104 


UOH 


unii 


- 




% 


ir( 


414 


141 


11 


- 


Ml 


dl 


lU 


SI 


- 


HI 


41/ 


111 


11 


- 



250 






ECC 




1.2.3 Press Display and Classified Advertising Expenditure 



mi 




l«fS 


im 


ms 


Ppmi Md WvviWii iiptiitv* li USS 


m 


173 


171 


m 


1,034 


m 


m 


713 


705 


174 


m 


*53 


141 


*14 




m 


4*3 


514 


470 




iut 


AM 


3.H3 


4,1« 


k/i 


i\,m 


\im 


11.737 


11*77 




1*3 


w 


H7 


It* 


174 


us 


m 


211 


m 


135 


3JI7 


xm 


1,*IS 


l,*17 


T^OOO 


im 


im 


1,**5 


^141 


«/• 


m 


m 


130 


131 


301 


3,04* 


3,437 


%m 


tm 


«/■ 


ISID 


l,S07 


1,044 


i,iti 


«/■ 


i,ff0 


7,03S 


4,151 


l,M4 






3t,M* 


331300 


35,Hf 


w/i 


m 


m 


424 


It* 




1730 


1707 


1,551 


1,111 


*/t 


37J3I 


31,101 


40,513 


43.347 


n/« 




11314 


13,311 


13.473 


15,11* 



P»MI Wd tifMilm fiMipil li yts 



1157 


1II.I 


to*.i 


10f.| 


114.7 


144 


73J 


77,3 


70,5 


07.4 


154.1 


114.3 


143.0 


177.3 


n/t 


177.4 


137j 


103.1 


111.1 


H/i 


11.1 


no 


41.7 


TV 


k/i 


14M 


111.5 


150J 


150.0 




II.I 


n* 


11* 


774 


35.4 


75.* 


141 


7*0 


10.7 


*34 


54.* 


514 


MJ 


34.7 


34.4 


1344 


143.0 


1304 


140.1 




13.1 


7*1 


733 


14.0 


31.0 


7IJ 


tt.1 


554 


57.0 




175.1 


171* 


121.3 


134.1 


«/■ 


110* 


11U 


IQI.4 


130.4 






14^1 




*5.4 




144* 


170.0 


144.7 


1417 


•/f 


754 5 


2413 


713.* 


211.1 




1».l 


1511 


155.4 


114.4 


n/f 


m 


*53 


W.3 


101.* 


iai 



Denmark, Germany and the 
Netherlands are well ahead of the 
ED average of 96 dollars spent in 
1994 per capita on total press 
advertising. 



Sources 

1.2.3 The Advertsising Association and EAT 
(1996), ECC coblations (1997) 

Note: Figures from 1993 onwards are not 
directly comparable to previous years due to 
changes in methodology in the Italian and 
Spanish surveys. Figures from 1 994 onwards 
for Austria are not directly comparable to 
previous years due to change in survey. All 
data are net of discounts. They include 
agency commision, but exclude production 
costs. All figures are calculated using the cur- 
rent exchange rates. 

* The data for the EU excludes Luxembourg. 



251 



ECC 




Cinema advertising spending in 
Germany exceeds most European 
countries by far: With 189.3 million 
dollars, spending is three times 
higher than in Britain or France. 



Sources 

1 .2.4 The Advertising Association and EAT (1 996); 
ECCcalculatians (1997) 

Note: Figures from 1993 onwards are not 
comparable to previous years due to 
changes in methodology in the Italian and 
Spanish surveys. Figures from 1994 on- 
wards for Austria are not directly comparable 
to previous years due to change in survey 
methodology. All data are net of discounts. 
They include agency commission and press 
classified advertising, but exclude production 
costs. 



1.2.4 Cinema Advertising Expenditure 





Iffl 


im 


itn 


19^ 


l9fS 


Ohm iiNrNil^ ttpMiAMrt li lAi UtS 


Antiit 


S.1 


s.» 


1.1 


n/w 


•/I 


''MfhM' 


m 


11.4 


11.7 


13.0 


334 




if 


1.0 


54 


if 


i/r 


FiM 


e.f 


01 


0.4 


01 


r/i 


FmKt 


SS.I 


405 


41.0 


504 


r/i 


GffMiT 


ISI.0 


m.4 


17S.S 


Ilf.) 


r/i 


Ortvu 




n/M 


R/t 


R/I 


r/i 


IfM 


1.3 


1.7 


1.1 


14 


31 


l»i*V 




n/t 


r/i 


r/r 


r/i 




U 


119 


101 


1.5 


r/i 


PwNid 




n/f 


R/t 


r/i 


r/i 


Sf* 


415 


4J3 


154 


14.7 


R/i 


ImWfi 


104 


114 


14 


10.4 


r/i 


UR 


407 


44.1 


40.3 


14.4 


r/i 


tU' 


n/f 


nfi 


n/t 


R/i 


r/i 


N«fmf 


10.0 


11.3 


15 


5.1 


r/i 


S«dti«rM 


m 


731 


19.4 


31.9 


R/i 


USA 


n/t 


«/• 


r/i 


R/i 


R/i 




n/t 


n7i 


r7r 


R/i 


R/I 


0mm pm mplH hi IRI 


Attitrla 


07 


01 


0.7 


R/i 


r/i 




1.3 


1.4 


1.4 


13 


13 


PtHurk 


U 


15 


1.0 


13 


R/i 


Fynd 


0.3 


0.3 


0.1 


0.3 


r/i 


Pr«Kf 


1.0 


1.1 


01 


09 


r/i 


GenMf 


l.t 


11 


13 


13 


R/i 


SrfM 


n/i 


R/f 


R/t 


R/i 


r/i 


IraM 


0.4 


05 


0.5 


1.0 


M 


Hfly 


R/i 


■t/i 


n/i 


R/i 


r/i 


fci . ■!. - J. 


0.4 


0.1 


07 


07 


r/i 


fvrtwpd 


S/t 


■t/i 


R/i 


R/i 


r/i 


Sf#i 


1.1 


1.1 


09 


09 


r/i 


SimAm 


1.2 


14 


1.0 


f.3 


R/i 


UR 


1.1 


1.1 


1.0 


1.3 


R/i 


lU- 


n7i 


r7« 


R/i 


R/i 


R/i 


Htniwy 


14 


3.4 


10 


1.3 


R/i 




3.0 


33 


11 


31 


R/i 


USA 




n/f 


R/i 


R/i 


r/i 


U]pm 




R/i 


R/i 


R/i 


r/i 



* The data for the EU excludes Luxembourg. 



252 






ECC 




1.2.5 Radio Advertising Expenditure 



IK 

lU- 



Swttnrfaii 

USA 



mi 


mi 


ms 


im 


ms 


lOt ■Aurlfalu tipwilwi h mrnm USS 


lOf.l 


1110 


132* 


1H.I 


171.0 


SA.5 


I7J 


HI 


lOli 


134.1 


1S.S 


110 


m 


2S.I 




ISO 


31.3 


2*1 


21* 


n/o 




*32.1 


*2t.1 


*4*4 




«}S.O 


*11.0 


*75.7 


777.1 




\n 


21.0 


31.5 


41* 


4LS 


321 


3S.S 


33.5 


35* 


424 


m 


m 


*81 


*17 


HI 


m 


17* 


101.1 


123.4 




321 


SOI 


31.2 


34.1 


57.4 


4*1.1 


SUI 


«S* 


315.1 


A/i 




n/i 


1.1 


21.3 




231.1 


TSOI 


2*5.1 


331.7 


fi/t 


fl/l 


R/i 


IWSi 


2,114.7 




12 


25i 


21.2 


50.1 


n/t 


2311 


2501 


2*51 


3317 


n/i 


U13.2 


7,175.1 


1405.1 


1SI1.4 


n/t 


U271 


MM.* 


1721.2 


1101.5 


2,013i 


irfnriitai iJipiiiKiri pm li USS 


111 


11.1 


14.4 


11.5 


217 


Si 


1.7 


17 


10.5 


137 


10 


17 


10 


5.0 




1.0 


7.1 


5.3 


51 


r/i 


If 


11.0 


10.1 


11.5 


a/i 


10 


*J 


13 


15 


#/• 


u 


U 


11 


43 


5.1 


11 


m 


H 


100 


111 


1.7 


1.7 


1.2 


1.2 


1.1 


1.1 


51 


7.2 


1.0 


*/• 


3.1 


5.2 


11 


IS 


51 


Il.t 


13.0 


104 


10.1 


*/• 




i/i 


0.S 


L4 


n/i 


1.1 


1.3 


4 * 


5.1 


m/w 


«/■ 


)l/i 


a/i 


7i 


«/• 


2.2 


4.0 


*.S 


117 




*.7 


71 


7 * 


11 




30i 


30.1 


33.4 


347 


«/• 


111 


IJi 


13.1 


14.4 


14.1 



Radio advertising spending is par- 
ticularly low in Europe, especially 
in comparison to the U.S.. Radio in 
Europe is perceived as a secondary 
advertising medium, so 1994 
spending was a mere 7.6 dollars 
per capita in the EU. 



Sources 

1.2.5 The Advertsising Association and EAT 
(1996), ECC calculations (1997) 

Note; Figures from 1 993 onwards are not 
directly comparable to previous years due 
to changes in methodology in the Italian 
and Spanish surveys. Figures from 1994 
onwards for Austria are not directly com- 
parable to previous years due to change in 
survey methodology. Ail data are net of dis- 
counts. They include agency commision, 
but exclude production costs. 

* The data for the EU excludes Luxembourg. 



253 



ECC 




The European TV advertising mar- 
ket was dominated in 1 994 by Ger- 
many with a value of 3.5 billion dol- 
lars. 



1.2.6 Television Advertising Revenues in 1994 

Net television advertising revenue per household in US$ 
and television advertising revenues in million US$ 



Gtrmony 

UK 

Holy 

FroiKe 

Spoin 

Grtt<t 

Nfthfrtonds 

Itlgkim 

Port«9ol 

Aistrio 

Swtdtfi 

Switzerland 

Finland 

DfnnMrk 

Nofwoy 

Irelond 



A^fftising rtvtnut ptr HH Advtrthing rmmp 




n 287 

71 18S 

72 ’^51 '*3 

68 IS9 

73 128 
91 ' - I 101 



Sources 

1.2.6 Kagon World Media (1996) 

254 




ECC .• 






1.2.7 Television Advertising Revenues in 1995 

Net television advertising revenue per household in US$ 
and television advertising revenues in million US$ 



Gtmiany 

UK 

lloty 

FrffiKe 

Spain 

Grttci 

Helhtrlandf 

Portagol 

Belgivm 

AusIrM) 

Sweden 

Switieriand 

DeiHiHirfc 

Finbmd 

Norwoy 

Irekmd 



AdvertKMig rmmte per HH Mwttyng rivffiue 





75 H7 

a2 I 141 

84 >|l91 

43 . ■ I 164 

97 I 108 



When TV advertising revenues are 
correlated to the number of house- 
holds in a country, the great belief 
of Greek advertisers in TV becomes 
obvious. Also, advertisers in the 
UK, Portugal and Austria spent 
above the average. 



Sources 

1.27 Kagan World Media (1996) 



255 



ECC 




The source predicts that TV adver- 
tising spending will rise, so that by 
the year 2004, the UK - with heavy 
spending on TV advertising in 
relation to the number of house- 
holds - will have a TV advertising 
market of about 7.5 billion dollars. 



Sources 

1.2.8 Kagan World Media (1996) 



1.2.8 Forecast: Television Advertising Revenues in 2004 

Net television advertising revenue per household in US$ 
and television advertising revenues in million US$ 



UK 

Germany 

Fronce 

Holy 

Greece 802 



Adverhsing rt v«fiu« pir KH 

317 

m 

m 

m 



I 7,480 

7,068 




Spoilt 


156 


2. 


NellterloiHis 


158 


1 1,071 


Am trio 


274 


1 907 


Portugal 


245 


1 m 


Belgium 


188 


1 753 


Sweeten 


132 


1 560 


Norway 


234 


H 4t6 


flnkni 


158 


1 368 


Deitmork 


131 


|336 


Switzerlond 


104 


|306 


Ireland 


148 


1 176 



2S€ 



1.3 Regulations /EU Actions 



ECC 




1.3.1 Europe's Rolling Action Plan for Information Society 

C. Accomplished actions/ C.l . Improving the business environment 



Nt. 


Spirfik IliiMraf 


MiUtoi Pitooti 




300 


CnTMimotiofi on m 

hfroslructuii Gilon 


CtnmiujQfl odoplMn 
C0M(fS)1SI 


S-9S loporl on itn rtsulh of iht pubk ronsultotion on ik Commisskin'i proposal for action 


301 


Coifwwicotion on riw prownl 
sMKn and hrtuf • opprooch tor 
optn o(((ss In ipiKnnwnnnirDliiorD 
nttworki and iwvkfs tOpm 
Kiftivl ftovision ONP) 


Commkion adoption 
COM (44} SI 3 


1 1 94 Ik Citoiminaition ronitmid Ik importontt of 1k DNf prtodpk of opM ond offbent 

0CC01I in tk ikrdtood tokoim mvkonmint from 1441. It romidirid ik uopt of 

J nUB -1 dLft ^ aJT II !-l— ^ |l» 

oppitiiiipfi V uiir ni niinoivu ini pbhhib pw n nv sunniuQii m iipsCTiDrr 01 m m 

dims. 


302 


Comnwnk alien on Ihi fdow-up 
to dw Grom Po|w on copyri^ 
ond riklfd riglift to ik 
totormolion soctolY 


Commisinn adoption 


1196 TkConirwiicotioniBconiQtooWoswssmanlofikcomu^^ 

Otmo Ftpor ond sol out ik Commkjon's loorkinp prognmna in Ik kid of topyriijk and 
rilotid fighls to ik irdormotion sociity to tk hwnontoih of Ik tntorttol Morkl. 


303 


Copriminkoiton on Itohml 
SinHci In tolar owBnijnkaliQm 


CofMiuston odoption 
COM (H} 73 


prisMiltd 0 surwy of tk livtoond oraiobitoi of ynivi^ wtki tk EU. h ok rkitr 

togtlhtf tk ilimifits of ik 1441 podopi rokrttog to utiivfrsoi smnci to propOM o 
slrangthimiig of tk ronctpl of vokt tolipkny swtocts, to portkolar vith ripord to 
offordahAly ond qtniky of ivvki. h obo nomtood ik impKi of univind sortoci on 
rigiond ond sodol (ohisioiv orkrio k Hs avokrlton ovir iton and Ik rolottondk botKon 
uitomnal wtoct and too toformolion srnitfy. 


304 


CufMiiunKotiofi on hdkw-up to 


ComndssMMi odophon 


234 1 94 Ik CorniiNjnkgiion nportod on in vim oiprKsod to ik ConAiktion on ik Moko O f 




Gram Popv on fnoUi t porurad 
comnunkotioni 


COM (44} 442 
Cound) lasdution 


13-4'95 and proposid (omifto moosum Old 0 ttoiftabk to od on k ronstnsni Mwb intif gid. On 

ik boK of Ik, pollkd support vns voygM from #w Monkr Stotoi. 


30S 


Convniriciian on ihi futot 1 
damtapaignt of 0 m fnorkft in 
jkoctonfs ond olkr tojorom 
tokpnotion toTvtoto to a 
conpaltova ontoronnNnl 


Conwdijton odopifan 

(0M(4S}43 


10-10-95 Tk communkoHon NgMiglitod k importonct of dtooctory srwis to #» gmnd coniwf of 
k tolor motion soctoly ond dtoorkd k gudolnn ond prmdplis wkh hovt kwi sot oc4 
for doKlory swim in mious dbickK ond okr Communty oth. loth k ET ond k 
Cound rooctod pmivMy to k (ormnunkation (Fitsiitoncy tondusions of 21st Mordt 1946 
Micom Cound and EP rosoblion of ?2nd Moy 1446). 


300 


Conwnunkodon on wdof im of 
itondordboiton to suppod EU 
poky 


(onvnnsion odo|Mon 
CQM|4S}4I2 


3CH0-45 


302 


CononunkioPon on 
*Stondordbotton ond ihi 
gkkf toformolton uctoiy; 
Ik broplon opprooch’ 


(onwwaon odopion 
C0M(44}3S9 


24-746 kotoidkConivMiiartiontotoiuyidnokv^klgtodkc^ 

mofbit ond k ICT stondodh proms, k bt^ poodda corkltiQns ton k oTMitod for k 
droMng up of titonddrds niMtod for tk torpknvitolion of fk irfor motion soriity, vd to 
todkoto by diri mtnns k Convnunity totonds to promoli kso ospitts for vlicfi it bos 
particular rosponddky- 



2S7 




No. 


Spnifk Mfrflsvrtf 


Dtciffon Mokfng Prsttif 




EiiloiKrHoiif * fvlkoffoiii 


m 


CoAifflvncirtion w thi dirt^ 


ConmfijMn odofdton 


t-96 


Tin rtport wb publtshid on in 37ii of Mordi 1996. 




on nwhMl ricogmhon of lypt 
Dppfovoi lof Nnninok 


COi|96|1M 






m 


ComntunicoHofi for in 


Conniiiion odo0nn 


796 


finomW svgpon m«clwi»m to etthf bfooduntin ond progromnn prodoc«r» vHfi 




in^oduction of odvoKod 






oxiTo toils of inlroiiKing wflt'SCffon 16.9 forml. Tfn 1 6.9 saton formol b tfn only 




lilivhiQn sirdrii in Europi 


C0AI(H)3i4 




gtoboif opf i*i porormior for in fiivrt of TV, indiiding HOTV. It ombodiiii dnonia/IV 
(onvirfHNi. PMirtion of n [oi 96/2 for kowkofting ond progrofntm producfion 
proposok In fkt. 96. 


310 


Dfchkifi on QiMloInti 


27t7AS/K(oynd 


941^95 


Tin objicthn Is in dmbpfmfit of o rangt of nnrkis ond opplkoiioni bond on EUIO 




bTOflSON 


ondEPodopHon 




ISON, k nundnr of profodi ham Um hninclnd in 1 995 ond in 1 996 tol wk kund on 






OJ: 




13 Apri with o tbsing don of 29it iuno. 


311 


Oifictift onModinQ Cioininkskin 


CuRMuion fldflplion 


13-3-96 


Folowng pokhtol ogs'iormnl on in ful ffboroksollon of voko loliplionjir unHicis and 




Ditdmf0/3aiymof73 






■ilroitrucivii, iib mmww givii ligdbrrnnindonofinlstof Jorniary 1996 and 




Jufy-1 990 rigarding in inflo^ 


0J:IWI3 




providti for possthit Ironsitional piriodi for Grtoco, Irtlond, Porlufof, Spain and 




nnnhirtiun of Mi [ompifiton 




Z23H 


loKombourg Mfb{id 1o Conwhskn opprovol. Tin owmiri ifio providit for oorfi 




tekcQnifnunitDiiQn tnorkoH 






tEnrofeoInn froni 1996 of oftaimivi Infiulimluroi for tbirofisad tilicorTisfirvkisond 
iilj out princfplii undor in conipiiiiion rolts lot bcmsing, inImorMnction, unhnnol 
larviit. numbiring and dboctorr wviiB. 


m 


KriclN o^nnl^} Gjnifiinion 


CmniiniM udoiiiiiin 




Faloiring pobtkal ogrunnrri on in loriy tbaroliatlan of ohtnnim inlh»tructiiri for 




Dirtclm90/m/FKof 


KnclintS/SI/R 


1t-10-9S 


nrvkis whkh on ofrtady oynn to cwnpifiion, i» nnosurt prondti for in wn of (oUi 




73% 1990rogv^ltn 






tifovHion miMrb la daltmr mdi nrvkii from 1996. It oho promlti for pniSUi 




obotnon of ifit rtdricfiofK on 






tramrtnnol pirndi for Grttci. Irtbnd, ftortugd. Spoin ond Luximbowg ivifid 1o 




in UH of (oUi TV rntniii for 
in proviiion of InlKom nrwts 


0J:L2SV49 


26-10-96 


Coinmiisionapproml. 


3TJ 


Dvtdivi omondoig ConMvuion 


CdnNMtiion idoffton 


16-1-96 


Tht tnMsuri MIy opMi in nnrhol for noUi (omnwnkoHom to conpoMion oi forosMn 




Diictm90/3»/EKof 


tOM(H) 




to in 1 994 Habit Grain Popir. ft pmidii far nlf-proiniton of tofroitradura or lat of 




23 990 rtgordmg mobii 


DimlniM/2/EC 




lord party tofrosinictuTi on! olowi from 1 998 diod inlirronmrtion bttnoin mofadt 




ond pmoAoi (onvnunkoiwQ 


OJ:L2ll/5T 


264)196 


naOnorki. Il roguaii ttMidMr Slolii loioraidir nguosti for Ikoncfi for DECT lynmn from 



258 



•• ECC .• 




fisri 


Sftcifk Mwiirif 


DtdiiM Mdkta| Pmtif 


Cdfidif 


114 


Dffictoit on tot opplcoiton of ONP 
(Optn Nfiworh Pcovhionl 
to vokt toltphonn 


CiiMiissiQfi odo^ion 

(o«K«i m 
VkmfmWVK 

(wndiiiidEPIdopHtii 


a? 1195 

13^1795 






0J:l311/i 


30-1796 


ITS 


Diracito on sotoito-coninuiii' 
toltons: ttotrofisoion of sotolHt 
nrvititondtonninoh 


Dlndh«W4i/K 

Ohl36l/1S 


mm 

IMO-94 


ITh 


Oktcivi on tot ust 
of TV'Stondords 


CgunilgndEPDdii|il<n> 
DMmU/47/EC 
OJ.: 23/1 1/TSNa. 1211/S 


74-l(h95 


31? 


Ditciivi on ligol prtotction of 


Dit«clh«9i/f/K 
(MndandEFidapliw 
W: 127/20 


11-3-96 

7?03-96 


Ill 


Grion PPptr on nwnboring 


Co^n^msswn odopkon 


11 -96 


Ilf 


Gritn Popir on iht ttgol 
protochon of Mcryplid sirvkis 


CnntnissiDn odoplton 
mm)7h 


6-3-96 


170 


Gmn Poptf on iht ttotrohsolwn 
of tolMoin mfrostnitluri and cohli 
TV nttworfui! pmdplts £ Itnttobli 
IPtolll 


COM [941440 
Cound Itsoiutton 
ERItsobrtion 


lMI-94 

495 



Expl«Mtleiii - lHplkafi«M 
Hia dvicfnt Kos Ima ri-subniffid oi rtii ut^ of EV^ 

Contmon PosMoa in Jvljf 1994, Ihi tmtjlkm pmiduri hoYing loM Qv*r tht i$$iji nf 
(QffrildkigY'. Ihn pf p^oid bdMi on ihi ftodml bifMm Coyndl wd Iht 

dwiny lhi tondNlIkin pmtMhfO- l^i [Hftctivt i fundaniinlal obiidMi m; 

- dilif ninMiQ iht fighH of Iht uttf^ ol Mtct ftltphony jtrvKts in Ihw nlutuuu wth 
ItiitDfliniijnicnHonj bodit) 

^ impfcmng for oil ustri, indwiing ibt provkltn of strvkis, 1o iIm fixtd 
infrastructurt of puhfk Itlophont ntfworb ftht EKrtdivt dots not ofigly to mohiti 

‘ MKOuroging ihi provision of void Itiidhony strvkts o) ComfHjnity Itvtl (iti olso 
JL1.10). 

Followfng Counci Itsolufion 92/(1/01 tht EKtoclivt txttnds tht scopt of (Mrtdtvts 
il/901/EEC and 90/3li/IK to wnovt mompoltos ow sotolHi tgujpmtnt and sonritn. 

Tht EHricIhri providto 0 rtgubtory hmiork for odvonctd TV (14:9, digHol, H0TV1 
indwting ilondorih; ond dtols with ihi issui tA condltond occtss to Igitol pon itlivision, 
fol u wtog #N DUlctirnt of tii toduslry-wkli toiwiltoWon on tfto topic. 

Tht (Nridivt providti for Iht harmonsoHon of tht outhor's right rtlofing to tht ilruchiri 
of dtiflhosts and for dw trtoHon of a now nghl proOtcting substonliol Initjimtnts iradt 
byinakirsofdaialiosts. 

Tht rapid dtvilopintnl of tht toftcotn morktl mtons ihof rtlonn of iht itwnbtring 
w w onni t tit li bt totvitoUt. This rifonn iii nttd to bt bostd on on agttfntfit on tht 
politkol prioriltos, sltfnming both from iht libtrolisolion Irtnd ond front chonging 
rtthnologicol Irtnds. Tht itchnkol work inll foluii on frcMt Ihii. Tht firton Poptr h 
intindtd to bMi 0 biocid consuhoiton w«h 

Tht Grtm Ptptr obm to idMHfy in tot Ighl of iht hrtoriul Morictt prindptos^ iht mtoatts 
titodid to urffguordtoi Itgd protadton of tncryptol strvkts to vi tgwd Itvtl ihroubhoul 
tot Comnwraiy. H hcbnifji rdotod to IPt protociton, to mirla pobcy md to tot Dviclivt 
onsoOtlto vdcobtobroodcostingof 119X 

Thi Grion hpif tstaybhts ihi gonorol prndpli of tot htt dnki of kdro^ruclurt to 
dibvir strvkts obiody optn to comptHtion. h proposts jmmtdiato Intotd octton ond lidts 
hi romptoitton to tot 1991 daft for strvkos Itoiralistoion. 



2S9 



ECC .• 




Sptdfk Mtaiiirti 


IMf (m MddiM Prociif || Ctludtr 


1 Eirinwlku - | 


Grtfn Popw on #n Ibordhotnn 
of talwom infrcKlrucluri end toUi 
IV nofwofks! NnpIfiTMOhitioii 
moosurt! (Port II) 


COM (94)612 
Cound Rssdufion 
EPRisolutwn 


134 9S 
S9S 


% Ofiin Popir he lounchod o tonuitation on ifn bsun rotstd by dkming (ompetion in 
i^Tostrwtori For tht bosk toiophone sorwi and ifu rtlnoni udoginrdi ll sols ouf fulurt 
polity on Infroslrucfuri liboraiisotion and inltiotis public dobolt on fhi issuos. 


QftMi ft|Mr on <oiiyn|^ ond 
rglnifd nghts In iht inlonnalinn 
sodrty 


Connvuion Qdndwi 
C0M(?S)3B2 


ld9S 


Thi GfNn Pbptr idinlifits in ditol riioH baun in iIn IMdol topyri^ vduri bMivismoy 
bi mdod wHh rtspKt totbolPRs tiploitod for fhi nm obctonk mim. H b bosod on ibo 
tOMhniom of o btofing with inlwristid cktlts in July 1994. Tbi dtolinf for writlm 
subrnsstoiH w« tnd Octafaw 1 99S. A bsoring on tartaln sptdfk puKtnns in rokian to 
tochnkd systoms of idintHkotton ond protodion ond on ciristo osptcfs rtlotad to Iht 
ocqunWon ond odnunblTDtoin of rights took pleo to Jonuvy 1996. 11 n 
WQS tknd in #M contoxi of t CodWintf on ihi rnottor ItoU to Fitoimt in Juni 1 996. 


l•tQ(n^MndotliofB foluting to ifN 
loQfll DSftKft of oltdronk doto 
intordungefElH) 


ConvnissMN) adoption 


1910-94 


OH usorsoro rtoommindod to ust§ Europoon modil E0f Agrotontni ond Mtonbof Stotosori 
rtcofitoitoidlid to locitotf tht u$« of this rnodtl ogrttmonr, nbkh logd promkini aim al 
protodtog 0 ((totodud opproodi to ilto logd bsvto coM to Ih^ 



C.2. INVESTING IN THE FUTURE 



[ ito.l 


1 Sptdfk Mmifii 


1l PtthlwIltoklMPtoaii iRiliadtf If 


ExflwiffihMit ‘ Niltttlm I 


324 


CononunKOlion on o imdiodology 
for tot inpltnwiiation of 
information uttoly oppbtDtioiB 


Cofitoitoionodapttoti 
COM [95)224 


134 95 


This commufKaitkim proposts « mtohodobgkDf opprooch of a gtrwfiii noturt for thi 
implamtnlolwn of oil typts of opplkottom whkh riprtstnt tht dfrrmg forti of Hn 
■nformoiton soriity. 


32S 


Comnwinkition on bifoi motion’ 
Sodotf From Corfu to Dtddto, 
llto nosr onwgtog prtortots 


Commisston odopKon 
COM 196)395 


24-7-96 


Thi ol^ictiiv d cofTtoiuiikfHito b to indkiHi thi impod of lh^ 

Europton Uiion poldts, inriby highlghting Wt prtorittoi: im|irotofig of ifw busimsi 
mtorortoitoit; tortstiig to A< Mur«; pt^ piopit ot iht tontro; nuttog iht ptobgl 
(hdling* Tht inforniotion totitfy tounci ol ihi 1-10^96 iwirointd iht totonhon of ihi 
Cofitoikiton to priitnl 0 rotostd ottton pltto to 



260 



C3. PEOPLE AT THE CENTRE 



' ECC / 




1 1 1 Mssmws 


II OwUMtJUdHfrfWM IICUm^ 


326 Communkolion on tolomoAo 


Commnion odopion 


4-1194 


oppicotiom for Iroivport in Europo 


COM (94) 469 






bsolutionEP 


6^95 




Cound rosoiulion 






95/264/DI 


28 9 95 


327 Communkolion on looching ond 


Commisiion odoplion 


2-10^96 


MnSif * mmmm M MpIWII 


C0M(96)471 




sodoty 






321 Communkolion on hormfuf ond 


Commission odoptton 


16-10^96 


ranwi on vntniii 








COM (96) 487 




329 Docision on dv Molo N 


Coootooiooodtoioo COM(95)263 


224^95 


Progrommo 








Cound odoplion 9S/S44/K 


2212-95 




Cound odoplion 9S/S63/EC 


10-7-95 


330 Docision on guidolnos for dw 


Cound ond EP odoplion 




trom* Europoon tronsport nototork 








0i:L22l 


9 996 



331 


Docision on MEO 2000 


Cnw^ii iMuCMMWjlW 


30495 




Progrommo 


UmdwkttmH/m/V. 


20-S^H 


332 


DocmonoMute-onnud 


— -J ag-_ 

uinMission Mopion 


210^96 




progrommo on Mubinguobsm in 
dio bdormofion Socioly 


COM (96) 456 






Progrommo (MUS) 


Cound odopion 


8-10^96 






OJ.: 





Ciiioiiot tf I - ItmftctHotis 

lW( o tnmuni « iionpfovidtslUbBiBlofonoclionpl«nfof ^wi m piinwiiio t w 
T iltw i olio in Europi. Finandoi mginMnng of puUk-privolf pvtnmfiips mods dotor 
otlwlion Tht Coundl Itsofution of Stpl-95 (oncmlrolts on Wo w o l ics Appfecolions in lood 
Trons^orl, idwi if iw pnonlMS fof diort Imn ocfions ond rocomninds dii soMnQ up of o Hiph 
Lmi group to ossist dw (ommisston milli ifw sirotogy for dopfoymint. 

loguKtod ky dw Europoon (ouid o( Ftormco (Jum 1996), dw proposod oclion plan ii 
onung ot incroosing dii synorgios vnong noNonof iniliafivos to proinoto Ihi iM of nnr 
lodmologits in odwotion. Tht okjocihrts ort to spood up tho diffusion of common 

nninvnpNi iwiiumid lur lionwi^ int iivpii|ivipn oi ifUiiny twcononoi loniini, ww 

troMng of toodun ond dn oxdiongi of oxponmcfs dvough sotting up o Europoon sdtool 
notwork btiod on dit intorconnoclion of txisling sdioof ntfuorks. 

A Europoon (onforinu (Doc 96, lruBok)«^ tofu stock of dovolopmvgs in notional scfioA 
notoforks, os vol os noods, oxporioncos ond dHfkullios oncountorod. 

IhoComnninicnIion colon to dwlogj ond fogukitorycIwlong B posodkycontontcirculoting 
on iko Intomot, giving porticular ompfnsis on dii issui of kormfui ond logoi contonl. It 
proposos options for short form oclion to combot or control such contont (solf-rogulotion, 
toduucoi protoction moocB, improvod intornotionoi co-oporotion, oducotion ond owormoss). 

Rnonciof support mochoni sm s for koysocton of thoprogromrnos industry ThoConunission's 
proposol hos toco ports. 

MEDIA II Iroining (1996 • 2000). A progrommt for dst training of profos si onoh of iho 
Europoai oudtovisud progromriN industry 

MEDUH * dovflopmonl ond dhtribution (1996 * 2000). Dds progrommo oims to promoto 
dw dovMopmont ond dso dhtrliMon of oudtovisuol works. 

Intoftgont tronsport systoms (ITS) for troffk monogominl, positioning ond novigolion is on 
ifitogroi port of tho Irons Europoon Nttworks-Ironspon guidolints. Thty mchido tho 
nocossory toduKol instolotions ond informolion ond tolocommunicotions systoms to onsuro 

IMIHWIQUI mm flllUPII Wvfni nfOnupPllini. W flit pnOHim Of Wit pHOPintS Hlul lo 

connoctions, koy links, intorconnoctions, intoroporobility, provisions rofoting to tho 
invironniont, tho optimisation of copocty ond offkionqr, sofoty apply to ns ond roquiro dll 
uso of ns for thoir ochiovi m ont. 

A m u te o n nuolpr o gronuno to st imulotodiodovilop m in t of 0 Europoon muitonodto contont 
industry ond to oncourogo tho uso of m u temtdto contonl in ihi omorging mformotion 
soctoly. 

Tho muteonnuol progrommo promotos muftinguoism in tho i nf or mo tion socioty ond hos 
boon obcotod o budgot of I SMECU H mdudos tho foloteng oclion bnos; 

0 . Support for tho croolion of o fromowork of sorvkos for Europoon Lmguogos; 
b. Encouroging dw uso of modom longuogo todmologios, rtsourcos ond stondordsj 
c Pro m oting tho uso of odvoncod longuogo took in tho Europoon pubik soctor, 
d. Accom p onying moosurts. 



261 



ECC .• 




No. 


SporifkilMiNf fk 


MtelUkg Proas 




Eiplartaft* I^AtaNni 


133 


Dirnlhf on l(w polKtion oif 

-if., j J — i- J ■- -ilu 

MMinMUBIS Wlfn riQorD n) lIN 
procKMig of ptrsonol doto and 
on riw fm movontMri of 5uch 
data 


Ef and Courd adoption 
9SMAC 
01:1291/31 


74-lCH} 
13-11 « 


11m gnwd irftlhtt profidii for 0 minbir of ri|^ br iht dott 

9m centrolw of data protmang (hnr proctniiit of dolQ, Mjlrafl of practswq, 

ratrfimttan (rf (ortam promsmta} ^ ^ 

Im inMuah nd owtas t M |doi^ fWU for 4 m fri* orn^^ 

Cormiunitr. Ik prindpfn of #v DlKiv* apply ta d of ihi 

cnstitata d« b ^wdik ruk ta ita takoni^^ 


334 


Critn Uving «id working 

in rtw Ifliorinotion Sociitir Nph 
fht 


ConMnsston adoption 

cmnjm 


747.96 


Ik 6nin kp« kma tk badi for a widi dbnission on vad, HMioik and licMogkd 

ddinp ta 9 m cortoKt of OTfiojmM ond omnonA rturtmip Mmt of norii, loboor mak^ 

ondlatdttaodiwnpBdMwIonnationMdity.AconadtalHmimxiagwp 

In e (olofjiini kU in DuUn and orgonMd logrikr wiA ik Hdi friadmy- Onlriiuiom 

itad rtoctiom ta 9 m GrtMi ^ v^tad froni 9 m nddfst poolii iud^ 

of1W6. 


33S 


Groon Ptipif on Hit fwoHcHon 

ml m — ■* u W : 2m. . 

Of MnOn onr miTnn ingnuy 
in AiMibvisMi ond Information 
SmritK 


Comfiii$$ion odofAm 
COM (96) 413 


16-10-96 


Tk6fMFk«'i^A9liMamtdumtabn^ rillKtnn on k inw of k protadon 
of minon and fiunm dbty ta 


334 


WlJb »-- ■ ■ mm i-i- - -- J 

WFim ni^ on iiocrang ono 

1 1 T- ^ J- |L^ 1 1- - 

Momng - khwii mo wonwig 
wdily' 


Commtiuoni odoptwn 
C0«A{9S] m 


29-1 1-95 


Ik Wki kpir h port of a pnxm diripMd nmdlanooiiBly to providi on onodrsa and to 
pi4 lorvH foilAnB b «ion to 9 m M of ducotion mid inAi% 
li ta Stab ml onolyitog ik rkn^B whkfi nnd to k oomidirtd, dtk rttpicting Im 
prtocipli of lulddtority 9 m WIdto kpv lugpsh fm pMTid objiclfm b ec^ 
b oodt of 9tam oni or nwo support projKH ot GxnnMiidly kd. 






C.4. MEETING THE GLOBAL CHALLENGE 


No. 


Ipifflr IWotwrn Di 


ifUa Proctts 


€diy« 


IwpliiiNiHlBplfdlm 


337 


biornolionN Confwonct it 67 
sodfty (Irussils) 




295 


A milling of rNmmnl 67 mMitan took pbo to Innufs on kk 25-26 1995. Ik muling 
o^opknsBid ^ko nocossi^^ to oncourogo tko dovofop^oonl of o oporfd-o9do odor^i^4lon soqo^^. 

tHWI pin piv|in} wWw fW Ifa M Ww 

67 (onduaom «roB 9m d9ba K poldn rNotad to tobmilton mdily k undir my. 
A progroB riport on 9m plol profKt MB prmnlid at 9h Hokbi 67 moiling to Jont. 


331 


InlomilionN Conforonco on 
mfonuftion sodity nd 
do»o>opwiiiit (ISAO) in SmA 
Afrko 




13/lS-S^W 


Soiidi Afrkmi Vb Ndda MUd, propoiid it 9h occBton of 9h 67 Conbmn to Ir^ 
« tobmtaton 5o(toly Coidorona Midi 9m dmloptog (oimirb ktoid b kuA Afrb 
(onbma took pbi to itA 9m pmidptaton if mmiy dodoptog (mmIriB. Co^ 
Imvo km iitahtikd wlA Ao Egypim gmmwMnt b Ai propmtaton of i Mkrop 



mMUm ^ 



262 



■ ECC . 




DELETED ITEMS 



No. 


Sptdfk Mttiffit 


MiUi| Proem 


Colt«lfr 


lxplM*lMi - NplkatiM 


m 


OriclM updating im droctin 
oi miiMd of rypt 

QppiOMi hv Ivninfliiy in 
parlkub in rnp«t ol mobli 
Ivmirab 


Conontoson odopHon 
CQM(H} 

Coud md Ef odopiton 


IIH 

V 


Aftion in Ihi tontoxf of dii Gmn Popv on moUi coniinunkohons 'odid) oms ot txtondtog 
iIn icopi of listing dktetin 91/^63, n viiw of ful tfevoksotom of ol Mocoin tmricis by 
1 Jon. J99B. 


m 


Dwte ononAdoftNan 
*Ua6ng4y-«tamgli''; 

Thi nsb of ihi Eurofnon 
IniMiois OS' bdNatofS 
fff doctfonit tonwnpd 


Conmiuion ndopfen 


IQf? 


Ihi town Bon wi dwribi b«l proitki opiorefer pubik uAiiwiruiiois end (wpew odtons 
mb^ lb BJ bsHMtom 'to lid by ixoRtofi* by Hling ondi^ 
rtw fow tochnofogtos ond dw fi'Onginiving of udnNiiliuPvi procdiff is dnt fodfiloto ifii 
uondtis ixdnngi of dota hi njpport of buBrasi mtodly. 


lit 


MNoImi on 6gplid ugn^^ves 


Conmiison odopMon 


low 


Tk Cnninsdn is (Oftodvwto b dtofitoKvi ligM 
d^tofsigpoMis. 


U] 


Coinnuniuiiiijii on dicfronit Ipl 
colicion nd iii pO|fnwnti tof 
nMdtranspofI 


Convftoston oiopion 


40f7 


Tk Communkoiion is Innd on fhi Coundl Dhictivi of 7S'I0'93 on dw Dpptosltofis by 
Itordwr Stotos of taxis on (town didn usd b b oiTtopi ef goods by rool ond tols 
and dtarps b b u» of (toon tofksiitoutas. Ikrt is f stong riquto fn^ 
indusiry for t staUsolion of tfw sprihcrtioni for In praduclon of ouMiiic III colicion 


m 


DiracNvi on honnonutan 
nwoswiB in d^doynmt of rood 
tonspofl tilptolks 


Comnisnon odo^ton 


IQ 97 


losdqnbCoudtisoMtonoflb2t-f9Sonbdtadopntooffndlron^ 

Ihh «l mdudt d fk bosk r«|uiriniin$s for ik sitting up of trolfk informerkn ond 
noiigatnn systonv in Eurapi. 


m 


ConoTwnkiriiQn on 6i dtoployimnl 
of talHooMo ^pkiofaiv hodlfi 


ConvTHiuon odopfai 


97 


Tk Dxnmunkodn dl mm kohh (on qflhuiuris os «d es itondvdkAion is»as od 

mtotoig- 


m 


{^inniuninifion on l4oiMip to 

dit Gnm Npir on to ond 

•xpUtolion of puUc {octor 
mfofm^Oon 


GjiitiiuiOn odofitofi 


97 


Ik ConwnjrwHton wN Eontain on ouissnNnt of dw rwKltons rattod front dw Jdwidtir 
Statos ond from nwrbit octors (indusiry and usws). It widncrbodtois to ntproYi 

ocoisdilty of puUk stoor fdorntotton wid li todkoto mp to mdli ik prnoto sictar to 
nidd nwn iKtoroinlr Ik morhit potonlial of pdlE stow 




Itodston on intofpporotfty of lOA 
IWfllUii 


Conwteton odopion 


97 


Tk Mows Cound dwision 9S/46I/H of k 6-1 1-95 odoptng ik IDA pruyuiiwN, nkh 
imiK ik Comnmian to prwMl dto Cowd and k ?iwi propesob hAmtog Ik ndtom 
progromrrM tvoluofkto. THh proftosol (oncifiii Ik odoptton of miosuris to insurt 
wAvopwoblty of mlwQfhs for dii intofthangi of dota bitwMn odrrwisirdon to Ewopi- 



Sources 

1.3.1 Communication on Europe at the Forefront 
of the Global Information Society; Rolling 
Action Plon (December 1996) 



263 



ECC 




1.3.2 Broadcasting Regulatory Bodies in Europe 



- 




!C 


SlSSShn 


Xi X 


hS 


AIM* 

•T 


1) 

1 


llwtePMte itete** 


AMrii 


(•MMn l« Ai OhMnvKt 








• 




1) MMMprfM^AtybawllMai 


MfeteMiAAiteiM 




fl At Iridniiii liv, 












Arad mA il 1 b«di il !■>« Art A»r 






VI Mr pihiMKiv) 












lrawUirappti<br SWtAadwran 
«ldi«n 


















» pMcbA»tUMMi.(lffi«AMiM 


















y-ndMlbMAiipwiO 




IdflM 


(MlMrtw4rMMMl0r) 










• 








lA«rfWii| SIMM CsHiiBH (fr) 










• 
















• 




■AiiAd lMi| • Arad Mmd 


AAA/tei: hM • MnA| Aa 

AiiMdUbrite 




(■■hM AA«fM| 








• 




MMA b«A| • Arad liMtd 


Site Ai »ite •> 




SfiMiMCaMlQQ 














Aiptif—iimiAadiifai 


















iMMiAiMraMi 




■lAifiwtKH 










• 








(wrflwiMMnfItiiAiAii 




• 


• • 


• 


• 


by Ai rafAdwy biAf AAI 


(1 ) te itei; m 
lim MArfiA A Ai InKi 




lMIMM1VI«rA 




• 


• 




• 


lWd« A CMnl h' Ai 

MMI 


ten MbAiMAAiltnn 




LM IM M TV CaHita 








• 


• 


kM^Aiiiai 






CMMSMhiCMiiAM 






• 




• 


liAiv A (Mra. MdMi^ br Ai ratMay 
bMMT 


AMr MAte A Ai Inn 




•M M IV AAwIM 








• 


• 


MiAHibMiMdMMd 




IkU 


lilMAWTMf 
















hmm 


CiMSMMr4t-Mwl 




• • 


• 




• 


■d^M by Ai rafter bM AAt by 


(1) AAlr OTnte "vAii: 

Imi, wtk9wmi A Ai Inn 




mi^hrnkm^ 


• 
















ZDF MA hrMtaliii) 


• 


• 


• • 






«i|MbytfMra|A«aybM»ii> 


TMli VAnAif In. MAwA 
















Ain Ann 


9mm 


il VMm M UiMa ASK (|Mi 










• 








iMiCMdIvMtoMTV 






• • 




• 




(Dtecnte^nAikrMnd 
(7) AMl nte Aited A Ai MM 


















teMMAAiten 



The overview of European broad- 
casting bodies, their approach pro- 
cedures and possible sanctions 
shows the significant differences 
between the countries regarding 
media regulations. 



264 






ECC .• 















iNlinl 


1 III) 


* 
















immUm 




* 


* 


• 


• 


br it nfrfMKT 


hMt: Pia. il ik bu 




Mn*! CiaiiMi CmmMm 








t 






MbTHM: (bb iwb Mteh bi^ 




Ipillv hniB*i|) 






* 




« 


tsRflriflli ntafR| It ttns It if-iM 
Hiiid paiw. wididoiiid 


Mic DkUh It dM it HtM 




Gmiv 






* 




« 


iMitl iri|N tl iipir} tr by InI 


PiM; lto*t OtPirigi lay vim 
bmioRi i tmirt b iiMi 



Ui«^ 



# « 



Hmr teilUiMhfhIM 
CHfhMiltiMl 

Mad Hgini InaicBfti CpmI 

Mpl n^k^ktUmtamm 









W/TM; Ffaa^ tiAiite ta ii 
•nal iif ik4ME iMmd if ii 
fthaK IMhIR^ HlpIHlH V 
■ihiwdflfiitlciM 
hlic/TMto: Morita il I ciR^^ 

(UMIcVMv 
(I) Prtiiic Ktontap iw 









4 






* 




n 1 Nbc liptn «f it MbR 
(21 ftbUE Katfi d it riicUH; liitt 




Saiii hit wd TV bi*4y (bdQi 


* 


4 






* 


wo^mi by impiNry bc^ ^ 


Itdb Vbiii bn 


* -1-^ 

nflnnHi 


kbpibbii (li^bili bbitty 

m 








* 




TIpMbMM 

, a . i 1 ^ J . h J 

■ pvicif mvvH 

iribrtrlHM«NMDIhl> 
' liMd 1 tn k t ^ MM 


MMMvIMi 


IN 


nctpHii[bii^.t * 

ianlMMCfi«i5C4) * 

MipHb^TVCiiPiMPi 




* 


* 




* 




■fit loan 




iiiin«b| 








• 




ibMW baki 1 init itafif 


MMMObiiAniptblibil 

idbi 










* 






biiib^bi^ ii, 





Sources: 

1.3.2 Robillard (1995), p. 268 -274 

* Power to appoint staff of public broadcosting 
companies; 

** Authorities that have no power of sanction 
have not been taken into consideration 



265 



1.4 Convergence /Steps 



ECC 




Becoming digital: The ongoing 
media evolution brings formerly 
separate industries together. 
Multimedia appliances allow inter- 
activity and new means of com- 
munication. 



1.4.1. Convergence between Content, Communications and 
Computing 

Total Market Value 1996; US$953 billion 



C( 



CooipMtiiig/ 
i WM w r PfoAwls 
Mariul^e:4^ 



. K * tq/M 

* nf * OAM 




Sources 

14.1 EITO (1996); Bertebmann (1996); Top- 
Stott (1996); ECC research (1997) 



266 



ECC 




1.4.2 Projections: Convergence of Local Online Media 



Local Online Media could inte- 
grate old means of communication 
and offer more narrowly targeted 
forms of advertising and sales. 




Sources 

l .4.2 European Commission: Electronic Publishing 
(1996);ECC(1997) 



267 



ECC 




Interactivity and selectivity are the 
key measures for possible steps in 
the interactive media field. The 
development of sufficient technol- 
ogies and the still questionable 
demand of users for such services 
will determine the time-frame as 
well as the success of interactive 
media. 



1.4.3 Evolution of Interactivity: Possibie Development Steps in 
the Interactive Media Field 



MMMr 


kv 


Mm m 


yrnmi 




. iilitf inf profiMiin ...tnikilriMiM 

urite 


... tilicl ihtfi itintlli if ... MirfflintnihBd, M dMf • 
pri^iiiiiiii BHrricB ipidifiiNaffniityiM 


inliricliii drii id $y^f«B hI 


Vmr4rmm 


)m )m im 1W7 


mm mm 


nos4 




Oiiri|iiAi^iiHiiiiiifn| higliw iptiii; atlHi; ifidt; |fill Hi tn 

fi|idbi|td {Qfitiiii ms| fthfm pmln]pn of niiiri od^id cMlint^ timiiiffi b i prt- cBmf|tiii if liliphBiif sid 

JneW$t Biiif i«lt; imvKfit dk|i(i| bA; Mmcfn |Wiim 4 irit: MhnrI kn Bii niirt^Mf 

IronHctnin; lAamif aHlm, mm mrliifini iriii ti infirmiljen pvdiBi4«p«iKilihm 


iMlBiHifl fdii- $pid nil in 
la«f Bdninin awlil 
EonviPfifKi if qUi, lihpAai^f biI 

Inrt/iwbitm m k 


nm 

ywffwta 


Fih niKigi) if Mb (mb VUh in Stlicllin vWt 1i tinri nid ilip 
Dnn4) nAdnii DbhA 

bd iMlm ilwiAii iifiMid i|Bl SiI«i4m «f tMwn 


iMn EH hdk ifii k imt mit SptiiilHd AriBciki. ibnn tn 
(Undhi TV) |irAd|nli. hdilMd hIkAh if 

PrdtfiHrf «f f|«riin| PriAifind hIkNu if ^Hriinf 

B«ii, tdidd by k «v«iU^ cdidd by k Mnw 


inv) tM ItHtBlai bnh b 

ddt II il WaraA d il dw 

Sirm imtcImi nitliBitiiCiffy fit 
'jparMiif iTiii$ nbth rddi li ii 


AMI 


OrAmbf UipiMit Odm nk bhbI m WisA 


8k)hiA[ o(di|ifi l«d ilii^ ilfir iBi HdiB 

Uiirv iiltd If riby ««f fwrihir liHri itliit Irf thiy mnl fiFlkr 


{nlIBhd llKlriAk attlbfVMt 
rddq h prifiriini if 4 m Ml 

CnlMiisid i4i rilvlipif li mn' 
pf^^bnatH' "^i4 ^rinBli 




T-l-l- f ■ ■ iJ JL ■ J * - 

mn| 


SilwKift il cHnti md BcliHdi Slvdiiti diKvii tif ki inini 
hmiifinlBiMrpv iviilvfi Hi ndi id Indiin 


Slfdtili 4iiiiit liplci iBiaf 


Ntwf 


S«fitftBi li mrni liw «i liM m4cIbi hh frta k 

0imbi4) iirvtr irtfiA •• 

Li«|HlPyrkHinkiKii| Iw |id% iMb iiirfn indi§ Am- 

Hid kri^,Hid 


^flififld wIitMw «f Hvi ml ftilifind iif«liM if mvi hI Smw dwh mvi mi Itfia ad 

Mpin fftHNd tf Hy iBi tMm tpo ftmmi fi ny dn (ii«i pmtm Ihb ■ IhhI, bd mmi 

wDiBBirf) hOhhiD idiiiianpiditddiiiBBrs 

Mh fidly iHHiwlBHdm VtlMBtl BtiiB Mim l^b f aility t\4m m 

cmfuiMif irtMdif 


9mm 


UBBdhvpiBinlVvtaldkMni GB»in4iiiiid 


GBiii i|dnt III j#T*HyHB liMa| la • diad cniai 


9mm ifdiit i4h mm 



Sources 

1. 4.3 BIS Strategic Decisions; Screen Multimedia 
2/95; Morgan Stanley (1 996): The Internet 
Report, p. 1-22; ECC research (1 997) 



2S6 



2.1 General 



ECC .• 




2.1.1 Ageing Population in Europe: Percentage Change by 2020 

Forecasted growth rotes in percent 



1 S44 oge range 



65 + age range 



FinloiNl 

ielhtrlamli 

FraiKi 

SwHisrlsfid 

Ui»ml>oiirg 

Gfrinaiiy 

Aiftrlo 

Irekind 

Swiitgn 

Portugal 

UK 

Grtofo 

ltdy 

Spoilt 

Dinmork 

Norwoy 




The European population will get 
older and older. For media this 
trend means developing new 
formats and programmes, for ad- 
vertisers it means developing new 
forms of advertising, especially 
designed for the elderly. 



2.1.2 Languages in Europe 

In percent 



Modwtongyi 





Swodsh 

Griik 

Porlvgist 

Uoitiih 

Finnish 

Otlufi 




Foriign longuofi 



Nearly half of the European popu- 
lation claims to speak English, 
although only 16 percent of Euro- 
peans use English as their mother 
tongue. Pan-European media will 
find it difficult to use any other lan- 
guage than English. 



Sources 

2.1.1 National statistical offices/Carat; Euro- 
stat (1995) 

2.1.2 EU; Focus, 35/96 



269 



ECC .• 




Household penetration and price 
depreciation correlate: Black/white 
TV and colour TV reached a pene- 
tration rate of 50 percent when 
the average price of a set was at 
1 .8 weekly household incomes. 
The VCR reached a penetration 
rate of 50 percent when the price 
was down to 0.7 weekly house- 
hold incomes. - Fierce competi- 
tion, or is the VCR just a less de- 
sired device? 



2.2 Consumer Spending 

2.2.1 Overview 

2.2.1. 1 Electronic Household Products Adoption Rate and Price 
Depreciation in the U.S. 

Price Depreciation: Number of weekly household incomes to pay for product in the US; 
Adoption Rate: Percentage of Households equipped with the product 



% of bo5«Wdj mitt ijfoduci 




The drop in consumer expenditure 
on media in the early 1990s is 
understandable: recession took its 
toll, as media expenditure in gen- 
eral is among the easiest to be 
reduced under financial con- 
straints. Surprisingly, books still 
account for the highest share of 
consumer expenditure on media. 



Sources 

2.2.1. 1 Dutton/Rogers/Jun (1987), p. 146; 
Pavlik (1996), p. 240; IP-6roup 
(1996); ECC research (1997) 

2.2.1 .2 European Commission (1 996): Electronic 
Publishing 



2.2.1.2 Shares of Media Expenditure in Europe 

As % of consumer expenditure on media from disposable income 




TV4|I<4« (m. 



Movitf/TliMirt 11% 



EfnfHiiMf (TV, VCR) 21% 



Otbvr 12% 



11 % 



Kiwtpoptfi 11% 



10 % 



iMlit 2S% 



270 



ECC 




2.2.1. 3 Comparison of Final Consumption by Households by 
Sector 

Figures in %, as of 1 993 



Cwinf 




CMiii|«d 


FwilNr«, 


lUkdartMd 

Mrii 


lupytjjid 


limriMr 


>irtr<ig, WMk 




tibvfii 


ftifwMr 


L L-JJ t- 






•dncofAiB 










cdivd MTvkii 


I-— i- — ^ 

MWffHv 




m 


7M 


10 J 


112 


136 


6.1 


0.5 


Dtmrk 


m 


5.3 


6.5 


2.1 


163 


9.2 


0.6 


Fronci 


in 




7 J 


9.3 


167 


7.2 


0.4 


Gfrmuiy 


m 


7.4 


8.4 


14.2 


15 9 


li 


06 


Grttct 


3?.9 


8.7 


8.2 


3.8 


143 


5.3 


03 


IrtM 


35.0 


6.9 


7.7 


3.8 


12.9 


10 J 


06 


Itafy 


m 


10.1 


9.4 


6.6 


122 


90 


0.2 


Httbrludi 


it.i 


6.9 


8.5 


12.5 


110 


9,2 


0.7 


P<>rtigol 


37.1 


10.3 


8.6 


45 


15.4 


4.9 


0.8 


Spain 


211 


8.9 


6.6 


18 


15.4 


6.2 


0.3 


UK 


Zl .5 


6.2 


6.7 


14 


17.9 


9.1 


0.6 


Etn 2 


20.0 


7.7 


82 


n 


15.1 


8.1 


0.5 



2.2.1. 4 Spending on Recreation, Entertainment Education and 
Cutural Services by Households 

in %, as of 1 993 

IrtM ^ ifiJ 




Mifd 4.^ 



The composition of European 
household expenditures differ: 
While people in Denmark, Italy, 
the UK and Ireland spent 9 or 
more percent of their disposable 
income on recreation, entertain- 
ment and education, people in 
countries such as Greece, Spain 
or Portugal spent only between 5 
and 6 percent on this sector. 



271 



Sources 

2.2.1. 3 IFPK1994) 

2.2.1.4 IFPK1994) 



£CC 




While expenditure on movies 


2.2.1. 5 Direct and Indirect Consumer-Spending on Audiovisual & 


remained almost constant, video- 


Multimedia Goods and Services in Europe 






related expenditure fell. The multi- 
media industry (except for the 


In million ECU 










video-games hardware industry) 
and TV revenues grew significantly 
betweeen 1992 and 1994. 




im 


IfOO 


two 


n/n 


Iti 


ItialiM 


2.574 


1024 


2,000 


22% 




IV 




Aiv«lWi|CMH 


13,442 


13,112 


15,117 


147% 




TVfttt 


4.IS4 


7,121 


7,430 


43% 




iiii 


1025 


1370 


2,074 


250% 




Ciyt 


1414 


3,032 


3,302 


11.5% 




TV-mH 


10,144 


10,014 


10,123 


04% 




VM» 




Cuathm 


4,0U 


4,434 


5,040 


13.7% 




vat 


4,111 


5,200 


4,402 


11.4% 




UHlkcMMtlH 


t05l 


1140 


1,104 


120% 




Umm4m 


2,121 


2.704 


1240 


141% 




LMffiteHiywt 


41 


12 


40 


402% 




iMitttlO 


43 


42 


iVi 


m/m 




Mtaiii 






27 


70 


110 


571% 




Ks 


1,741 


1055 


4,130 


40 2% 






IS 


50 


134 


1271% 




tISM VWt nSaWWa 


1,SH 


1,047 


505 


510% 




VMm ftaBM ' Stfhrara 


m/9 


m/m 


m/m 


m/m 




M 


57,407 


57,450 


41,030 


10% 




GNf 


5,135,000 


5,714,000 


5,005,000 


50% 






0.00% 


1.01% 


1.03% 


• 


Sources 












2.2.1. 5 European Audiovisual Observatory; BIPE 












Conseil; EPOD; EBU; Screen Digest (1 996) 













272 



ECC 




2.2.2 Per Capita 



2.2.2.1 Total Media-Related Expenditure per Capita in Selected 


Big Media Spenders: Overall 


Countries 
















media spending per capita in the 


Expenditure per capita in 


US$ per year (1994) 










USA in 1 994 was about four times 


















higher than in Spain; it was 


mm mm wm mmmmmmmm 


US$ 377 higher than in Japan and 


iHtWOClIvt 


Til 


3.11 


1.30 


a/a 


114 


a/i 


4.23 


US$ 562 higher than in Germany. 


TVU»Kir«n 


Ton 


4l9i 


T4tl 


a/i 


a/a 


a/t 


44.23 




Paf TV 


?S.0J 


iw 


2J+ 


3.04 


7.03 


11.20 


1S.77 




Haw VMm [VMy t Pwtkettt 


IfU 


17A3 


114 


4417 


113 


77.41 


30.53 




Mta Sffrwsrt 


3TJ0 


Sf7S 


f.42 


47.15 


13.45 


45.41 


41.44 




niiiiliiiliiiifnirfun < TQTM 


KH7 


IZiH 


47 SI 


15.11 


3145 


141.11 


13L41 




Ntwipaptrf 


iv/i 


4t43 


a/a 


a/a 


a/i 


a/i 


a/i 






n/^i 


5i.3f 


a/a 


a/a 


a/t 


a/i 


a/i 




iMb 


n/t 




a/a 


a/a 


a/i 


a/i 


a/t 




PitilKii f KpMiitan (fit - TOTAL 


34 fQ 


ox*]Mn 


30.70 


a/a 


20.10 


a/i 


42.30 




Ntsvift (mrsfi} 


13.5S 


11J3 


0.13 


12.12 


1.33 


20.71 


io.n 




TWfl(tfi/0p«rf/C»K«r1i 


n/* 


a/i 


a/i 


a/i 


a/i 


a/I 


a/i 




EilMm 


a/a 


a/i 


a/a 


a/i 


a/i 


a/i 


a/i 




feWpM i) rrtiw TOTAL 


w'a 


a/i 


i/i 




a/i 


a/i 


a/i 




CDAaia 


a/i 


a/i 


a/i 


a/i 


i/I 


17.54 


a/i 




MHt SlfTH 


</• 


10, or 


a/i 


a/i 


a/i 


a/i 


a/i 




Tth^itka Svli 


a/a 


a/a 


a/i 


a/i 


a/i 


2102' 


a/i 




V«i 


a/a 


U5J" 


a/i 


a/t 


a/i 


11.52 


a/a 




CawarAan 


a/i 


a/I 


a/i 


a/i 


a/a 


a/a 


a/a 




TOTAL 


a/i 


a/i 


a/f 


a/f 


i/i 


5100 


i/i 


Sources 


Tilira^wdriHaa Sarritat 




447.SS 


773.11 


a/i 


177.30 


i/a 


347.12 


2.2.2.1 Screen Digest March 1996; EITO 


iMKawwkatlaiMp-*.* 


10071 


lOt.lO 


sail 


a/i 


12.11 


a/a 


71.70 


(1996); Goldman/Sachs; IP-Group 
(1995); TBI Yearbook (1996); World 


















UkKmmmarnm DIO- TOM 


»ISI 


574.45 


332.03 


404.10 


M.21 


I2fi2 


444 51 


Telecommunication Development Report - 


(■■prtai Hvriwara 


137 i2 


107.li 


74.51 


a/a 


57.74 


3141“ 


14142 


ITU (1995); StBA: Stotistik und 
Wirtschoft 7/1996, Meeker /De Puy: 


















Offkt EifilfMat 


VM7 


33 41 


14.01 


a/a 


14.05 


a/i 


27.41 


Morgan Stanley ■ The Internet Report 


SeHwirt 


m4 


130.15 


4414 


a/i 


2511 


a/i 


17.02 


(1996); Medio Perspektiven (1996); 
ECC research and calculations (1997) 


Sarvkai 


\iSM 


101.41 


7t.4S 


a/a 


23.11 


a/i 


1111 




Hviwvt MaMaHact A Saffacl 


an 


St 14 


11.10 


a/i 


lilt 


a/a 


50J2 


* The German statistics show an average 
spending of $104.82 per year. The 


irfMOwTi ililhlj an T0T4L 


mv 


51400 


11743 


44117 


140 40 


110.11 


407 54 


smaller figure was chosen for compara- 
bility; 

** only includes Home PCs; 


U ipiai^i - TOTAL 


170 zt 


31411 


102.41 


411 41 


Iff .21 


40140 


211S2 




l&ts 


UAUi 


WtM 


1.VBB 


SffJI 


7,10 IT** 


mn 


*** without media related household oppli- 
ances; 

# colour TV only; 




## ECC estimate 



273 



■■ ECC .• 




The 1994 European average of 
US$ 78 for audio, cinema, video 
(rental & purchase). Pay TV and 
interactive media spending de- 
monstrates the differences: While 
per capita spending in the U.S. 
was twice as high as the European 
average, people In Italy only spent 
half of the European average. 



2.1.22 Media Spending per Capita in Europe, USA and Japan 

Average spending per capita and year (1991 -1 994) in US$ for audio, cinema, video 
(rental & purchase). Pay TV and interactive media 



USA 

Norwoy 



UK 

Gtrmofly 

SwitifHond 

FrcNKt 

DtfimarA 

Swt4tfi 

ItlgivNi 

Avstrio 

NftheHonds 





Sources 

1111 Screen Digest, March 1996 

274 





illlliflhlL;! M lilliiilhil 



BCC 




2 . 2.23 Total Spending on Media Software Products per Capita 

1 994, TV licence fees not included 









fiviv tut 




Qmm 


n.n 


IS 


11 


2 


- 


IS 




41 


it 


1 


3 


13 


H.W 


S5 


iS 


1 


- 


13 


W.57 


SI 


n 


1 


- 


11 


VM 


3* 


ii 


2* 


4 


14 


»7i3 


*0 


11 


4 


4 


11 


S2.K 


34 


44 


- 


- 


22 


51.S5 


30 


it 


I 


4 


2t 


71*7 


m 


21 


1 


3 


ID 


U2J5 


S5 


if 


3 


- 


14 


4011 


33 


24 


17 


S 


20 


fl.*5 


43 


11 


20 


- 


IS 


Vii 


SI 


IS 


4 


- 


2? 


103.23 


40 


It 


IS 


4 


11 


i*i.n 


2t 


H 


11 


- 


13 


107.30 


4S 


41 


3 


= 


11 



Media software spending is up in 
Norway: although in 1994 the 
Norwegians spent an average of 
US$ 1 1 3 per capita on media soft- 
ware - the highest figure in 
Europe, they still spent US$ 49 
less than the Americans. 



Average Expenditure for Pay TV per Capita and Year 



\m 


Iff} 


Iffl 


Iffl 


Iff! 


m 


0.01 


0.SS 


1.03 


ISI 


3.13 


4,31 


7.43 


t.24 


12.40 


1.23 


1.74 


3.0t 


4.0S 


1.34 


1.S4 


1.14 


113 


US 


3.43 


111 


1t.l3 


23.fl 


32.5t 


2S.03 


1.11 


m 


IIS 


III 


4.21 


- 


1.1 S 


1.17 


l.lt 


IM 


1.4S 


1.17 


I4S 


2.17 


4.3S 


1.01 


1.SS 


2.15 


lot 


3.03 


0.10 


1.SI 


431 


S.3I 


713 


44* 


114 


11.23 


l4Jt 


11.40 


3.H 


3.13 


4.20 


IS* 


4.03 


3.1S 


3J3 


10.01 


1U0 


1SJ7 


1l.t1 


1M7 


1l.lf 


14.17 


11.20 


» 


0.33 


1.44 


2.40 


3.04 



Canak makes the most: with 
US$ 25 average spending per capi- 
ta in 1994 the French spent more 
money on Pay-TV than people in 
Sweden or in the U.S.. 



27S 



Sources 

2.2.2.3 Screen Digest, March 1996 

2.2.2.4 Screen Digest, March 1996 




2.2.2.S Expenditure on Video Software (Rental and Purchase) 
per Capita and Year 



ECC 




Spending on video software is 
much higher in the U.S. than in 
any European country. Are the 
Americans better prepared for 
interactive television? 



Sources 

2.2.2.5 Screen Digest March 1996; ECC calcula- 
tions (1997) 




276 



1 1 1 1 1 




ECC 




2.2.2.6 Spending per Capita on Audio Software Products 

In US$ (per year) 





9f90 


mi 


m2 




1993 


1994 




Sflurtt 1 


S«frcf 1 


SMrce 1 


Sowci 1 


Sovrct 11 


Sotrcf 1 


Avitrii 


nil 


34.26 


41.44 


43.29 


43.3 


47.05 


Mgiiin 


26.19 


30.58 


34.43 


37.44 


40.2 


42.10 


Mgsrhi 


n/o 


n/n 


f|/a 


n/Q 


0.2 


fi/n 


Cztdi fitp. 


n/o 


n/a 


o/d 


n/Q 


4.9 


n/o 


DiiMiiorit 


32.^3 


35.18 


40.42 


36.83 


51.2 


53.42 


f\dmi 


34.10 


31.69 


31.38 


18.09 


22.0 


22.79 


frwKi 


34.95 


31.99 


35.77 


32.63 


33.4 


34.70 


GtrniofiY 


40.35 


47.77 


55.89 


55.11 


35.4 


59.25 


Grf«<i 


r\/a 


n/u 


f\/n 


tV^D 


9.7 


n/a 


Htitfory 


o/fl 


n/n 


o/fl 


t^O 


4.9 


n/o 


trtM 


10.08 


16.15 


11.00 


16.45 


18.4 


18.20 


Itdy 


1192 


11.48 


12.16 


895 


9.4 


9.42 


Nttbfflaiidi 


46.55 


45.20 


46.08 


42 25 


41.1 


43.00 


Norwoy 


?9i5 


49.22 


60.96 


49.60 


59.5 


61.81 


PoM 


n/o 


tt/o 


n/o 


ii/d 


2.8 


n/o 


Portifiii 


n/o 


n/fi 


n/o 


n/o 


11.0 


n/a 


SloYokk 


n/o 


ft/o 


n/a 


nAi 


0.9 


n/o 


Sf«in 


13,98 


15.64 


16.13 


12.14 


13.6 


1365 


Swfto 


35.37 


36.03 


48.77 


35.26 


37.9 


39 75 


SwHitfM 


43.46 


50.28 


51.94 


51.47 


527 


56 91 


UN 


40.77 


37.04 


40.33 


34.85 


40.9 


41.66 


USA 


29.37 


30.47 


34.7 


38.13 


460 


45.49 


kpM 


24.43 


30.47 


35.04 


44 84 


47.6 


47.95 



Norwegians, Germans and the 
Swiss spent between 57 and 
62 US dollars per year and capita 
on audio recordings in 1994, 
while people in America and 
Japan spent far less money on this 
sector. 



Sources 

2.2.2.6 I. Screen Digest March 1996 : value of 
sales of audio recordings 
II. The IFPI Statistical Handbook 1995: 
value of sales of Vinyl, MCs and CDs 



277 



ECC 




Switzerland, Norway and Sweden 
are the European Top-3 spenders 
per capita on box office movies. 



Sources 

2.2.27 Screen Digest, March 1996; Eurostot; 
ECC calculations (1997) 

Note: The data refering to source II is calcu- 
loted on the base of Gross Box office rev- 
enues in ECU divided by the number of 
inhabitants and by the yeady overage no- 
minal exchange rates. For most countries 
there are some taxes included except UK, 
Sweden, Portugal and Greece. From 1991, 
the data referring to Germany includes the 
former East Germany. 



2.2.2.7 Average Spending on Cinema-Going 

Per capita and year 





1990 

Stwft Stircf 

1 II 


1991 

Sstrci Iwrce 
1 II 


Smtcp Sir Cl 
1 11 


im 

Sirci Sotrti 
1 N 


IW 

SMTCt Siirca 
1 If 


Aifirlo 


m 


fr.75 


9.58 


7.21 


1.20 


7.39 


9.11 


9.73 


10.65 


1169 




m 


I.2K 


8.11 


9.35 


9.26 


9.31 


9.34 


9.90 


1174 


1181 


OiMilrii 


iiji 


10.23 


10.20 


10.04 


10.93 


10.15 


1157 


11.62 


12.84 


12.28 


Flnltiid 


10.02 


9.S7 


9.99 


9.10 


9.59 


772 


6.63 


6.76 


7.83 


9.74 


FroiKt 


13.22 


12.37 


12.58 


12.09 


13.95 


12.94 


13.96 


13.86 


13.85 


13.26 


Grttci 


n/u 


5.14 


n/fl 


4J5 


il/fl 


3.30 


n/fl 


3.54 


n/fl 


n/fl 


GiriMiiy 


m 


6.47 


962 


7.41 


9.98 


7.11 


11.85 


9.74 


12.96 


9.30 


IrtM 


Ml 


9.05 


9.54 


9.97 


10.16 


9.92 


9.50 


9.97 


11.44 


11.07 


IfdY 


9,30 


1.77 


9.06 


9.28 


10.30 


9.44 


8.21 


8.45 


8.94 


8.91 


liMiiifcgirg 


fl/fl 


7J0 


o/fl 


9.37 


n/a 


8.62 


n/fl 


9.78 


n/fl 


10.06 


NtlfiirMs 


U1 


6.19 


6.44 


6.49 


6.64 


6.20 


6.83 


6.64 


7.08 


673 


H«rwoy 


15.40 


14.45 


13.73 


13.87 


14.44 


14.92 


13.53 


13.43 


15.24 


17.11 


Portifai 


n/a 


2.02 


n/a 


1.76 


n/a 


2.06 


n/o 


197 


n/fl 


2.01 


Spfllii 


2.39 


7.15 


7.42 


7.66 


9J4 


9.10 


7.74 


9.16 


9.35 


8.31 


Sw*dti 


14.73 


1559 


15.69 


15.43 


I8J1 


15.80 


12.57 


13.43 


13.94 


16.02 


SwftitrM 


17.10 


15 95 


16.99 


17.17 


17.95 


18.96 


19.07 


17.87 


2183 


21.70 


UK 


9.03 


fl.26 


9.05 


9.09 


1070 


9.62 


9.39 


9.17 


11.02 


10.74 


USA 


20.02 


n/ii 


1897 


il/g 


19.06 


n/fl 


19 99 


i^p 


2071 


n/o 


Jopofl 


9.54 


n/o 


9J7 


a/p 


9.92 


n/a 


12.22 


n/a 


1212 


n/o 



278 



mnyiflnl 



fcr / 




2.2.3 Per Household 

2.2.3. 1 Television Licence Fees in Western Europe 

In US$ per year and household 




1Ni2 


0537 


10444 


04 47 


11101 


0414 


10703 


9107 


744 74 


707 34 


743 


10497 


I4S27 


179 07 


144 09 


13300 


179.13 


13001 


173 47 


14014 


71000 


174 54 


714 


144 41 


1HU 


10539 


13917 


11770 


14500 


17711 


147 07 


174 74 


100 03 


150.01 


704 


15497 


14911 


11719 


15143 


174 00 


15005 


11540 


11540 


9147 


150 35 


13307 


145 


17497 


41 N 


37 90 


44 49 


3591 


54 70 


4107 


50 05 


4347 


11435 


M09 


171 


9300 


743t 


50 44 


4007 


49.13 


90 40 


4971 


09 54 


7440 


17717 


14000 


174 


1354 


73SI 


57 00 


7411 


59 01 


7444 


5904 


44 74 


5450 


97 95 


7011 


93 


71.54 


7330 


57 50 


70 79 


4319 


0139 


4474 


44 34 


54H 


H71 


0177 


90 


7530 


77 77 


40 70 


7447 


4177 


9004 


49 37 


09 00 


7407 


10194 


05U 


103 


79 73 


1^1 






«/• 


iVi 


iVi 


iVi 




100 00 


157 90 


701 


154 41 


1041 


43 77 


00 34 


4404 


95 33 


7145 


90 49 


77 44 


107H 


157 95 


107 


14304 


17 70 


M57 


l/i 




i/f 


iVt 


K/t 


«/• 


71451 


10074 


170 


134 97 


9011 


7070 


90 74 


7979 


10500 


0157 


HS4 


0744 


179 00 


109 07 


130 


100 



The Austrian television licence fee 
appears to be the highest in 
Europe. Over the last five years 
most European households ex- 
perienced significant growth in TV 
licence fees; only in Finland, Ireland, 
Italy and the Netherlands did not 
TV fees grow excessively. 



2.2.B.2 Expenditure of Pay-TV-Subscribing Households on Pay TV 

Per household and year in US$ 





19t0 


1991 


1913 


1993 


1994 


ms 


France, households spent more than 




140.00 


11000 


700H 


340 43 


30049 


75000 


US$320 in 1995 for Pay-TV, while 




30017 


743.49 


309.07 


79147 


34197 


331.13 


the TV licence fee in these countries 


Citdi iip. 








4/1 


i/i 


50.00 


was between US$ 1 65 and 21 4. 


OmmiI 


34970 


734.00 


317.70 


77110 


40437 


77000 




lyad 


340.09 


334 70 


3D7il 


710.71 


I43M 


370.75 


Sources 


FriKt 


344 40 


334 40 


9133 


3U.14 


371.14 


345.00 


2.2.3.1 TBI Yearbook (1996); The European 


Gify 


137.71 


19147 


734.71 


743.77 


303.34 


759 41 


Media Mop (1996); Eurostat; OECD; ECC 


Grwt 


3SS.00 


mm 


Z7SJ10 


730.00 


tS7J7 


13100 


calculations (1997) 


Hwfiry 


n/i 


4.00 


34 9S 


44.17 


4130 


90 91 


2.2.3.2 Screen Digest November 1 995; European 
Television ■ Cable and Satellite (1996); 


IriM 


n/i 


r/i 


R/l 




i/i 


11333 


ECC calculations (1997) 


iNtfr 


n/4 


04.30 


777.44 


19151 


343J5 


117 » 




-I. -J. 


17147 


7I5J1 


350.47 


31910 


34III 


30000 


* Belgian households pay an additional 








cable TV or radio licence. 


iwmy 


137.50 


743.10 


304.00 


35414 


341.05 


304.34 


** The German data of 1 994 includes only 




n/M 


i/i 


4/1 


n/t 


n/t 


71.43 


the western Lander. 




UM 


mil 


317.04 


777.34 


79U0 


374 11 


*** Figure refers to cable homes only! 

**** Due to the fact that Sky and BSB merged 


SwiJh 


793.19 


774.37 


303.14 


34100 


371.11 


370J9 


in November 1990 the number of sub- 


Swift mW 


717.03 


741.77 


770.90 


349.77 


190.17 


34007 


cribers differ. The data used assumes that 


Ui*™ 


191.74 


37944 


5119 


35919 


433i2 


1474'” 


80 percent of new BSkyB movie sub- 
scribers ioined both movie channels; churn 
rote of old subscribers is 20 percent. 



Pay-TV-subscribing households are 
willing to spend a lot of money on 
the service. In Belgium, Finland and 



279 




• ECC .• 




2.3 Household Equipment 





2.3.1 


Equipment in Household^ 






Colour TV sets, in Western Europe 


2.3.1.1 


Penetration Rate of Different Media in the Househoid 


a commodity of virtually every 


Figures in 


percent of total number of households (1994) 






household, are widespread in 














Eastern Europe too. The figures for 


>aa8itii mwmn? 








VCRs and CD-player figures show 
deeper gaps: Only a quarter of 
Russian households own a VCR, 
only 8 percent of Polish households 


Asstrii 


ISO 


If 


SI 


If 


to 


%tkmm 


!/• 


H 


11 


iVi 


21 




7S.S 


15 


44 


31 


71 




iVi 


n 


ft 


ti/i 




Cttd lifu 


i/i 


K7 


ft 


17 


SO 


have a CD-player. 


taMil 


n.\ 


ft 


SI 


Sf 


IS 




»*-i 1 


m 


ft 


IS 


S3 


70 




hmt 


m 


ft 


M 


9/t 


It 






ns 


ft 


5f 


it 


t3 




Otmu 


)U 


ft 


SI 


•Vi 


IS 




Hnfvr 


iVi 


71 


SI 


II 


SI 






]U 


ft 


SI 


31 


tt 




m, 


IS.I 


fj 


14 


n 


15 




nVraM^HB 


I17.J 


ft 


11 


IS 


15 




N»mjr 




ft 


Sf 


II 


7f 




PfM 


IP 


t3 


If 


iVi 


8/l 




fiffipi 


111 


ft 


M 


iVi 


43 




iniP 


r/8 


If 


ft 


iVi 


i/i 




^lii 


ut 


ft 


SI 


n 


7t 




SfrtiM 


m 


ft 


IS 


m 


» 






mi 


ft 


If 


ss 


i/i 




UK 


m 


17 


71 


52 


II 


About 40 percent of all house- 
holds in the US have their own 














PCs. In 1 994, the connectivity rate 
(a PC with a modem) was remark- 














ably low in Europe compared to 


2.3.1.2 


Digital Household Equipment, 1994 






1 1 c 
















Sources 


K 


37 


13 


It 


15 


24 




IP 


1 


4 


1 


3 


2.3.1.1 IFPI (1995), IP Group (1995) 

2.3.1.2 0ECD;IDa;TfieEconomist28.10.1996, 


fCMte 


15 


«/i 


1 


1 


4 




15 


71 


37 


II 


75 


p. 44 


CiU8 


45 


•Vi 


47 


1 


4 



280 



ECC / 




2.3. 1.3 Multimedia Access: Main Lines, Television Sets and 
Personal Computers per 100 Inhabitants, 1994 




USA 


Sf.5 


79 


397 


1 


4.3 


17 


a/i 


a/i 




M4 


55 


193 


3 


«/• 


a7i 


30 


35 


Smtim 


M3 


40 


173 


4 


97 


1.3 


37 


34 




S47 


50 


140 


5 


0.1 


03 


A^l 


a/i 


SvilwW 


5f7 


41 


311 


5 


19 


09 


35 


43 




SOf 


40 


15.4 


0 


a/i 


a/i 


34 


39 




413 


55 


144 


9 


11 


14 


19 


34 


ioa 


471 


44 


13.0 


10 


17 


0.1 


A/l 


a/i 


m 


4lf 


45 


151 


11 


14 


05 


30 


35 




445 


40 


107 


13 


a/i 


a/i 


a/i 


a/i 


MM 


44f 


47 


119 


13 


a/i 


a/i 


a/i 


A^l 




42f 


45 


73 


14 


a/i 


a/i 


a/i 


a/i 




371 


43 


7.0 


17 


a/I 


017 


a/i 


a/i 


Haiar 


170 


43 


14 


30 


a/i 


a/i 


a/i 


a/i 




309 


39 


14 


31 


a/i 


a/i 


a/i 


a/i 


Qtmm 


470 


33 


19 


33 


a/i 


a/i 


a/i 


a/i 


PtrM 


350 


35 


50 


34 


iVi 


a/i 


A^l 


iVi 


NW 


131 


30 


13 


34 


a/i 


a/i 


a/i 


a/i 


IM 


143 


30 


1.0 


34 


a/i 


a/i 


a/i 


iVi 


IhM 


301 


37 


11 


39 


a/i 


a/i 


a/i 


a/i 


Ota 


3J 


33 


03 


34 


A^l 


a/i 


a/i 


A^l 




145 


Z7 


4.3 


= 


- 


* 


= 





The U.S. had the highest figures 
for the number of PCs, TVs and 
telephones per 100 inhabitants, 
while Denmark and Sweden 
reached in a worldwide com- 
parison the ranks two and four. 
Countries which are otherwise 
perceived as technologically ad- 
vanced like Japan, Germany or the 
UK only reached ranks in the 
middle. 



2*3*2 Spending on Equipment 

2.3.2.1 Sales of Audiovisual Entertainment Products in Europe 

In thousand units 






fV>Sf4i 


30,133 


30.045 


30,404 


30,173 


30.075 


0.SX 


VCI 


11,511 


11,049 


11,351 


10,011 


10,134 


0.1% 


VUh Gsm (Nfikt 


1*90 


11015 


HS7S 


10,450 


7,115 


33% 


K 


UiO 


U30 


1,430 


1194 


4,041 


171 


CmMf 


not 


1430 


m 


4,131 


1931 


391 


CMOMOrtvt 


t 


4 


SO 


431 


1310 


4391 


O-IPWfV 


- 


• 


40 


ns 


310 


Ul 


llMrffeK HlTlf 


a/i 


49 


91 


no 


143 


301 


i4;f nr-s#if 


- 


4 


JS 


93 


133 


451 



While the markets for TV sets and 
VCRs stagnated, the markets for 
video game consoles and cam- 
corders dropped. But computer 
and multimedia equipment en- 
joyed a significant rise. 



Sources 

2.3.1.3 ITU (1995);VDMA/ZVEI;ComputerZeitung 
8/1 996, 20/1 996; ECC research (1997) 
2.3.2.1 EiHopean Audiovisual Observatory; BIPE 
Conseil:EACEM;GfK;Saeen Digest (1996) 



281 




ECC 




The European market for TV sets 
shows different developments, as 
sales in Italy, Belgium, Germany, 
Greece or Portugal went down in 
1 994, while Sweden and Switzer- 
land showed serious growth rates 
of up to 18 percent. 



23.23 Spendings on TV-Sets by Private Households by Country 

In million ECU 



ctiitfy 


19f0 


Ifti 


1f92 


m3 


m4 


1994/93 

QMMft 


Avstrio 


305 


324 


298 


303 


313 


3% 




314 


310 


318 


308 


288 


6% 


Dill ft 


222 


202 


186 


184 


189 


3% 




205 


216 


156 


162 


167 


3% 


FrMce 


2,370 


2,100 


2,039 


1,954 


1,895 


-3% 


GtnMty 


3,681 


3,156 


3,160 


3,191 


3,049 


•4% 


GfMCt 


418 


241 


234 


229 


219 


•4% 


IrtM 


59 


59 


62 


56 


59 


5% 


Italy 


1,914 


1,687 


1,485 


1,176 


1,026 


•13% 


Uuftoarg 


14 


14 


14 


14 


12 


•14% 


Mftlurfaids 


546 


526 


517 


492 


504 


2% 


Norwoy 


124 


142 


170 


146 


151 


3% 


Portvfol 


217 


233 


237 


207 


196 


-5% 




1,133 


1,159 


944 


835 


834 


0% 


SwadM 


389 


366 


307 


248 


283 


14% 


Switiffload 


389 


397 


388 


347 


411 


18% 


UK 


1,385 


1,338 


1,219 


1,095 


1,114 


2% 


EU 


13,154 


11,909 


11,153 


10,431 


10,128 


3% 



Sales for video-game consoles 
dropped in Europe, Japan and the 
U.S. by between 1 5 and 33 percent 
in 1994. This is one explanation 
for the 64bit-frenzy of the sup- 
pliers, offering ever faster and 
better game consoles. 



Sources 

2.3.2.3 BIPE Conseil; GfK; European Audiovisual 
Observatory (1995) 

2.3.2.4 BIPE Conseil; GfK; IMA; Screen Digest; 
European Audiovisual Observatory (1 995) 



2.S.2.4 Sales of Video-Game Consoles 

In million units 



cMMlry 


1990 


1991 


1992 


1993 


1994 


lW/»3 

Onr§i 


Eiroft 


2.9 


12.8 


14.6 


10.7 


7.2 


33% 


JopoR 


6.2 


7.2 


6.3 


5.2 


3.7 


29% 


USA 


13.8 


10.2 


14.2 


13.7 


11.7 


*15% 


16ld 


22.9 


30.1 


35.1 


29.6 


22.6 


-24% 



282 



' ECC / 




2.3.2.S CD-ROM: Number of Produced Titles and Sales 
Worldwide 







NMikartnitlis 

im 


JffI 


fS/HCbonfi 


CD-ROM 


n/a 


5.379 


5,840 


n 


CD-ROM f«r MS-DOS 


n/o 


it/d 


4,003 


n/o 


CMOM for kpfk 


n/o 


It/d 


1704 


n/d 


CD-ROM lor Windows 


n/o 


n/d 


1,324 


n/d 


CD-I 


n/o 


261 


368 


39X 


CDTV/CO 32 


i|/a 


120 


77 


-36% 


VIS 


t|/o 


5f 


28 


■52% 


MMCD 


ti/a 


35 


48 


37% 


IDO 


t|/o 


33 


58 


76% 


Ooftrook looii 


n/a 


291 


298 


0% 


Total 




6,300 


9,500 


51% 


Until soM IlniitliMfl 


tt/d 


n/d 


n/d 


n/o 


oicisdiaf to Doto^st 


m 


53.9 


n/d 


n/o 


occordiai to Info Tadi 


m 


92.0 


n/o 


n/o 


VotM(b»o«US$t 


It/d 


fO.7 


11.1 


69% 


Aviragi ^kt (USS) of 


n/d 


n/d 


n/d 


n/o 


RifartKi tititi 


n/o 


342 


244 


■29% 


Eatoftaimniot 


n/Q 


50 


n/d 


n/d 



The number of CD-ROM titles is 
expanding rapidly, with more than 
50 million units sold in 1994 and 
a value of US$ 1 8.1 billion in 1 995. 



2.3.2.S Number of Households with Video-Game Consoles 

Figures in millions 



ctootry 




mi 




lfV3 


m4 


W4/»3 

ONHIfi 


laroft 


45 


17.3 


31-9 


411 


46.3 


13% 


lopwi 


12.3 


19.4 


27.1 


34.9 


37.6 


8% 


uu 


31.3 


415 


49.4 


53.1 


57.9 


8% 


ftlol 


411 


71.2 


108.4 


129.1 


1418 


9% 



Sources 

2.3.2.5 TFPL CD-ROM Directory; Dotoquest; Info 
Tech; European Audiovisual Observatory 
(1 995). Figures appear questionable. 

2.3.2.6 BIPE Conseil; GfK; IMA; Screen Digest; 
European Audiovisual Observatory 
(1995) 



283 




ECC .* 




One fifth of all CD-ROM titles 
offered concentrate on leisure 
time entertainment. These titles 
also had the highest growth rates 
from 1993 to 1994. 


2.3.2.7 CD-ROM Titles Offered Worldwide 




iffi 


\m 




Ciwrii UhareThM 


MO 


1,043 


731 


Ani. Cillvrt 


447 


724 


41 .f 


imwiii, UfiAsUn 


2SI 


417 


41.4 






24S 


424 


M.7 
















7N 


42f 


S32 




J«K C«Mr 


424 


431 


411 






2M 


314 


371 




\am 


W 


m 


344 




6M|Tipitf 


212 


332 


247 




bcytltfMAi 


1M 


131 


234 




hwtf , fliwti 


24f 


302 


213 




M 


S.4H 


5,221 


mj 


More than one third of British 
households own a video game 
console, while In Europe on aver- 
age only one fifth of the house- 


2.3.2.S Video Games -Hardware, 1994 

Number of consoles in private households, figures in 


thousands 




MUfT 


NHMlMUivMiMiAM 


MhiMw •! 
vpMwmIm 


holds have a console. 


Anfrii 


n\ 


\n 


m 




Ifl^H 


m 


\n 


731 








\i% 


2IS 






m 


14% 


211 




frtKt 


7,213 


21% 


4,734 




Gif Mf 


1l,t5f 


21% 


7,474 




« S ■ 


3S7 


20% 


214 




H^r 


im 


10% 


m 




liiHibnri 


47 


20% 


31 




vivnnHvi 


1004 


21% 


1,242 




IlifWIf 


503 


21% 


377 






3,27S 


22% 


im 




SwWm 


1,011 


20% 


757 


Sources 


SwHttiM 


Ml 


1t% 


524 


UX 


13,233 


34% 


7,140 


2.3.27 TFPL; Media Perspektiven 10/95, p. 491 
2.3.2.8 BIPE Conseil; GfK; Screen Digest European 
Audiovisual Observatory (1995) 


nils 


44,7fl 


20% 


21,753 





284 





•• ECC .* 




2.4 Preferences 



2.4.1 Which Type of Programme Viewers Would Like 
to See More on TV 

In percent 



Full length movies are the top TV 
programme almost all over Europe. 
Domestic news, comedy shows and 
information programmes are also 
favoured by viewers. 








m 


Mi 


88A 


m 


m 


Kl 


m 


Mi 


not 


SM 


SWI 


Ui 


OI 


MM 


fOl 


MS 


VO 


AmiIh 


«Mi 


FdllMi|Hi atvlM 


54.7 


599 


693 


56.5 


505 


501 


767 


579 


406 


689 


354 


507 


767 


677 


587 


867 


877 


55 


60 


DMMtlkMWf 


414 


710 


651 


435 


70.5 


43.1 


487 


76.1 


45.7 


696 


794 


767 


447 


378 


497 


568 


67.4 


75 


57 


Cfirfy iWwi 


33 f 


40.9 


64.1 


788 


547 


435 


479 


463 


38.7 


467 


31.4 


385 


60.8 


673 


555 


636 


635 


35 


53 


MnwIIm pftfraHMi 


m 


375 


745 


355 


47.0 


331 


797 


40.8 


48.0 


56.1 


441 


477 


51.3 


71.5 


68.0 


371 


364 


39 


48 


Sfcrts fVMti 


719 


71.1 


385 


77.4 


379 


315 


384 


748 


18.0 


39.1 


74.9 


779 


47.5 


345 


360 


789 


37.0 


75 


47 


Vvlity 


93 


74.5 


387 


90 


776 


776 


711 


705 


710 


343 


34.4 


19.3 


767 


733 


61.3 


47.3 


473 


75 


41 


filct iktwf 


71.3 


357 


49.7 


355 


75.7 


316 


461 


796 


15.5 


77.8 


188 


755 


51.7 


78.0 


30.5 


467 


46.5 


19 


39 


MWf 


377 


71.9 


353 


37.0 


39.7 


75.5 


49.0 


103 


30.0 


384 


718 


70.4 


777 


783 


375 


19.0 


38.0 


13 


37 


Ht|BlM/tdk flMurs 


776 


376 


535 


75.7 


78.7 


73.7 


353 


16.6 


367 


458 


730 


71.3 


784 


773 


79.5 


19.3 


746 


13 


33 


CiUwd 


17.1 


15^7 


331 


17.1 


77.3 


11.7 


394 


167 


13.1 


784 


149 


197 


706 


778 


373 


11.1 


15.0 


17 


79 


Nbfkfyttf 


14.6 


17 7 


307 


130 


18.9 


160 


344 


17.7 


98 


74.3 


69 


19.1 


77.7 


700 


77.3 


760 


71.9 


09 


79 


CtIiwm 


17.1 


14.7 


407 


170 


11.7 


80 


390 


18.9 


174 


18.5 


65 


10.4 


13.5 


30.7 


778 


377 


30.1 


07 


76 


S«ip •ftrts 


768 


706 


15.3 


717 


144 


70.8 


77 


98 


48 


13.9 


75 


10.7 


706 


10.7 


197 


437 


514 


08 


75 


OM«i 


9.7 


11.0 


374 


84 


10.1 


11.3 


735 


7.9 


13.4 


18.1 


65 


10.3 


30.4 


798 


757 


14.7 


14.8 


07 


73 


ItlflMn 


79 


4.0 


176 


40 


194 


173 


63 


53 


93 


133 


5.1 


85 


5.1 


130 


19.7 


58 


18.8 


10 


70 



Sources 

2.4.1 INRA/TV World 11/95. Survey collated 
from 500 to 1 000 respondents per country 
by member companies of the International 
Research Associates (INRA), coordinated 
by Sample Institute, Germany. North 
America contains the IIS and Canada. No 
separate data for Japan was available. 



285 



ECC 




Objectivity is relatively unimport- 
ant for programme popularity. 
France, Italy and Poland seem to 
have the highest overall expec- 
tations of their programmes. 



2.4.2 Attributes of Favourite TV Programmes 

Expressed as a percentage of respondents 








Alls 


KL 


nu 


m 


88i 


m 


riA 


m 


not 


SfA 


sm 


IK 


at 


mm 


m 


MK 


UM 1 


iMfki 


wMi 


hrttfMliiil 


664 


644 


8 S .7 


769 


79.4 


67.9 


861 


54.2 


70.2 


70.0 


70.4 


75.4 


77.4 


69.2 


002 


827 


07.6 


64 


73 


UirtM 


433 


35.9 


511 


50.1 


53.2 


35.9 


51.0 


30.1 


62.1 


533 


30.9 


45.6 


450 


40.3 


54.3 


30.5 


40.5 


42 


56 


Ulii^ 


44.1 


614 


552 


53.3 


32.2 


453 


40.0 


72.0 


479 


41.1 


512 


41.0 


73.1 


54.7 


60.7 


36.7 


41.1 


38 


50 


UiifHw 


46.5 


32.6 


69.5 


391 


642 


32.3 


44.7 


243 


24.5 


563 


409 


32.7 


56.0 


642 


502 


39.5 


43.3 


27 


47 




247 


27.3 


51.5 


23.4 


32.9 


26.1 


16.4 


9.5 


16.1 


41.2 


22.2 


200 


19.3 


260 


37.0 


330 


290 


27 


44 


ftMltHc 


25.1 


21.1 


55.1 


299 


19.2 


30.5 


41.2 


17.0 


23.7 


330 


25.0 


41.4 


21.1 


20.0 


41.2 


166 


25.2 


25 


39 


Oriitad 


247 


29.7 


499 


33.1 


14.0 


239 


60.3 


23.5 


7.9 


360 


10.7 


35.0 


34.9 


35.0 


53.5 


32.2 


30.9 


21 


30 


Nm-vIiImI 


30 f 


26.4 


51.0 


37.9 


239 


34.9 


39.9 


204 


260 


507 


283 


306 


475 


395 


54.7 


350 


353 


24 


35 




19.3 


17.9 


44.7 


30.4 


12 


20.0 


430 


14.9 


15.2 


349 


13.4 


33.5 


17.6 


25.7 


532 


32.9 


20.3 


26 


35 


EiiMil 


426 


20.6 


55.1 


54.1 


25.1 


267 


45.0 


12.0 


433 


31.9 


45.1 


32.7 


379 


45.0 


363 


82 


64 


30 


34 


SMililiil 


27.1 


15.7 


311 


342 


16.6 


26.0 


574 


11.0 


243 


263 


35.4 


36.5 


200 


142 


24.0 


42 


7.5 


31 


31 




25.2 


14.7 


412 


214 


32.6 


13.4 


51.9 


11.2 


113 


29.0 


269 


19.0 


36.2 


290 


560 


02 


11.7 


7 


30 



Sources 

2.4.2 INRA/TV World 1 1 /95. Survey collated 
from 500 to 1 000 respondents per coun- 
try by member companies of the 
International Research Associates (INRA), 
coordinated by Sample Institute, 
Germany. North America contains the US 
and Canada. No separate data for Japan 
was available. 



286 



ECC 




3.1 Reach and Number of Newspapers per 1,000 Inhabitants 

As of 1995 



Ci^ 


a_^i4H 




JUntrii 


m* 


75 




m* 


54 


Dfwk* 


k/« 


74 


mrnt 


IV^l 


17 


F«ci 


154* 


S3 


6«nMty 


314 


11 


6r«i« 


i|7i 


47 


IlM 




43 


imr 


in 


45 


ttiiUihwIii 


310 


71 


Winwy* 


n7f 


15 




ii7i 


14 


Rnik 


54* 


d/i 


Ipdi 


100* 


3f 




m* 


P 


SwtMiflid 


345 


17 


UK*' 


317 


15 


kfot 


574 


n/t 


USA 


m 


i^i 



Young people in Southern Europe 
read much less than people of 
their age group in middle or 
northern Europe. 



3.2 Daily Newspapers Published per 1,000 Inhabitants 

As of 1995 



Japon ^^^iiiggillllllllligillllllllllllllllllllllll^^ 

Swtdtn^ 

SwitifHoml 36 S 

Auitiia* 321 

UK 

Germany 314 

NitheHoNis 310 




I Ntw^pan ptf 10 CH) inhobitanh 



Statistically, for every second per- 
son in Japan there is a newspaper 
each day, while these figures are 
much lower in Italy or Spain. 



Sources 

3.1 AG.MA;ENPA;FIEJ (1994); European News- 
paper Minibook; BDZV (1996); ECC (1997) 

3.2 FIEJ (1994); BDZV (1996); ECC (1997) 

# Figures for 1993 

* Sweden and Norway; population over 
9 years, Finland and Denmark population 
over 13 years 

** The reach of nationwide newspapers is 
60 percent. 



287 




•• ECC .• 




Especially the North of Europe 
and Switzerland read heavily, with 
more than 80 percent of the popu- 
lation reached by daily news- 
papers. In Southern Europe only 
less than half of the population 
can be reached by newspapers. 



3.3 Daily Newspapers: Percentage of Population Reached 

Population over the age of 1 4 or 1 5; in percent 



Switiedtmd 

Finland* 

UK** 

Norwoy* 

Sweden* 

Germany 

Avstrfo 

Denmarh* 

Netheiiands 

Ireland 

Belgium 

Fronce 

Greece 

Italy 

Spain 

Portugol 




Sources 

3.3 FIEJ (1994); BDZV (1996); ECC (1997) 

* Sweden and Norway: population over 9 years, 
Finland and Denmark population over 1 3 years 
** The reach of nationwide newspapers is 60 
percent. 



288 



3.4 Share of Revenue Sources in European Publishing 

In percent 



ECC 




I kk ^ -'V Sob 



ItolY 

Greece 

Denmark 

kelond 

France 

Bdfhjm 

Netherlands 

Finland 

Sweden 

Portugal 

Germany 

Spain 

Luiembourg 















Advertising revenues are calcu- 
lated on pricelists. Due to high 
discounts, especially in Southern 
Europe, net figures might differ 
significantly. 



Sources 

3.4 FIEJ;BDZV(1996) 

Note: The sources did not indicate an exact year. 



289 



ECC .• 




With more than 1 ,1 00 newspapers 
published per thousand households. 
Sweden is on top of the European 


3.5 Newspaper Titles in Europe, 1993 








poUiM Raoltrs 

Siolfy ptr copy 


liiwAtf of 

(w 1,000 loosUli 




mMMT H wwimtn 

Ddly WMldy 


list: Each day, there are as many 
daily newspapers published in 
Sweden - with a population of only 


Aifitrki 


17 


140 


n/o 2,2 


845 


Bflgbrn 


35 


n/o 


n/o 3,3 


445 


8.7 million -as in England with 


FrwKi 


94 


W 


23 3,3 


399 


more than 57.8 million. 


Gtrmimy 


414 


31 


9 2,5 


737 




itpir 


83 


n/a 


n/o 4,0 


325 






44 


63 


n/o 2,4 


778 




Sfoiii 


126 


I^Q 


20 3,0 


340 






103 


73 


n/u 1,9 


1,112 




UK 


103 


751 


19 2,4 


878 


Different consumption habits: 
While Northern and Middle 
European countries read more 
newspapers (with a daily reach of 


3.6 Daily Reach of TV and Daily Newspapers 




Daly Rtodi d Daly N«wt|Mpirf 


Daly Rtodi of TV 


Avsfrk 




71 80% 




<75% 


over 80 percent), the daily reach 
of television is above 75 percent 
in most of Southern Europe. 


U^m 




61-70% 




75-15% 


Deimork 




71 80% 




<75% 


FMond 




>10% 




<75% 




Froiici 




<61% 




75 85% 




(rtrnwiry 




>W% 




<75% 




Gfttci 




<61% 




>85% 




Irtkmd 




61 70% 




>15% 




ifdr 




61 70% 




75 85% 




Nftktriafidf 




71 10% 




<75% 




NcKWffY 




>80% 




<75% 




Psrivgol 




<61% 




<75% 


Sources 


Spohi 




<61% 




>85% 


3.5 FIEJ (1994); Statistiscfies Jahrbuch fur das 
Ausland(1994); BDZV;ECC (1997) 

3.6 Young & Rubicam; European Commission 
(1996): Electronic Publishing 


SwMitN 




>80% 




75.15% 


UK 




>80% 




75-15% 



290 



ECC 




4.1 World Audio Market^ 992-1 995 

Market value in million US$; CDs, Cassettes, IPs 



Europe accounts for roughly a third 
of the world audio software mar- 
ket with a value of US$ 1 3,391 mil- 
lion in 1995. 



CMifry 


1W2 


LtgitiMstt Mdto loki lnrilBM USS) 
im im 


199S 


ArA« pkuf lurt 1 at % of total, , , 

\m ms \m 

ooiti foHt iMrfctI voioo 


Avftri« 


294.^ 


318.S 


348.3 


409,4 


1 


2 


1 


Itlghmi 


mi 


378.0 


403.7 


474.6 


4 


4 


4 


Citfk 


30.9 


44.4 


50.6 


75.1 


n/fl 


6 


5 


Demnork 


192.0 


190.0 


26S.6 


306.3 


1 


1 


1 


FIiiIiiihI 


13S.2 


96.7 


m.6 


142,8 


1 


2 


2 


Fr«K« 


1,936.0 


1,848.5 


1,988.1 


2,391.8 


3 


3 


2 


Gtnuwiy 


2,638.2 


2,690.7 


2,876.5 


3,269.6 


7 


3 


3 


Gffftf 


94.6 


93.6 


100.7 


131.0 


20 


26 


19 


Hffigary 


31.4 


42.3 


50.4 


64,5 


n/o 


17 


23 


IrduMf 


61.6 


63.2 


65.5 


77,1 


7 


5 


2 


Italy 


S96.6 


519.3 


534.7 


582.7 


15 


33 


20 


NifhtHoiidi 


647.S 


618.8 


629.4 


716.5 


9 


6 


6 


Hofway 


232.6 


208.2 


256.3 


290.8 


5 


4 


2 


PokiMd 


64.2 


66.2 


108.2 


88.7 


n/fl 


22 


19 


Portugal 


74.0 


107.0 


108.4 


140.2 


8 


0.3 


0.3 


Rttiila 


186.9 


127.4 


131.4 


224,3 


n/fl 


73 


62 


Syaii 


S69.0 


493.7 


5309 


557.3 


2 


2 


1 


SwfdM 


348.6 


313.1 


332.0 


381.6 


3 


3 


3 


SwitioHaiifl 


322.0 


329.5 


365.6 


449.2 


5 


4 


4 


UK 


1,998.5 


1,976.0 


2,3664 


2,571.6 


3 


1 


1 


Total Eiropi 


10,787.9 


10,538.9 


1!, 622.3 


13,391.0 


14 


n/fl 


n/fl 


JapOR 


4,328.3 


5,082.4 


6,392.7 


7,552.1 


n/o 


n/o 


n/o 


USA 


8,BS6i 


9,833.1 


11,8369 


12,102.0 


n/fl 


3 


2 



Sources 

4.1 MPA; Screen Digest, August 1 996; IFPI 
(1996) 



291 



ECC 




While the number of singles sold 
in the UK is extraordinarily high, 
Germans buy roughly one third of 
all CDs sold in Europe. 



Sources 

4.2 IFPK1995) 



4.2 Audio Software - European Sales, 1994 



mm^Tf IMfiiikK) VdM 





S^jM 


Iff 


ftCs 


CDi 




kmtfk 


3.1 


OJ 


2.7 


15.6 


346.3 


Vdyiviii 


3.5 


- 


1.3 


ia.B 


403.7 


Cifdi 


(M 


0.3 


3.1 


3.6 


50.6 


PiMurfc 


0.? 


0.4 


1.6 


13.6 


265.6 


rinlDiid 


0.4 


0.1 


3.1 


S.l 


111.6 


FrcHKt 


m 


0.1 


27.7 


95.2 


i , 9 Ba.i 


G««y 


40.3 


0 .S 


40.4 


171.1 


2 , 176.5 


GftfCi 


- 


2.2 


1.2 


3.5 


100.7 


HifigM'y 


0.02 


0.01 


4.1 


1.5 


50.4 


IrtMl 


0.9 


0.01 


2.0 


1.9 


65.5 


ltdy 


4.4 


- 


153 


21.1 


534.7 




5.9 


0.3 


1.3 


34.6 


629.4 


McrwQY 


1.4 


- 


2.4 


12.2 


256.3 


Palond 


- 


- 


23.0 


3.5 


10 B .2 


Por1v]|iii 


0.05 


o.t 


4.2 


6.1 


10 B .4 


ftiiiki 


- 


l.S 


50.0 


4.0 


131.4 


S|»i. 


0.9 


2.0 


19.1 


34.2 


530.9 


Swidtn 


2.1 


0.1 


2.6 


21.9 


332.0 


Swfttidiud 


II 


OJ 


3.1 


20.6 


365.6 


UK 


63.0 


4 i 


56.0 


116.4 


1366.4 


Total 


146.1 


116 


267 0 


620.5 


11 , 622.3 


Aimval fTowtli li % 


16 


33.7 


15.3 


ia .4 


11.5 


f oropo Of % nf world lolo i 


37.4 


33.5 


19.4 


35.6 


32.7 



292 



■■ ECC 




4.3 The Piracy Market in Europe 


For the media industry, piracy 
appears to be a problem especially 
in some Eastern European coun- 
tries like Russia (with more than 
70 percent of audio software sold 
illegally) or Hungary (with more 


ctMtry 




VMif Piracy 

« %•! MriMt 

I9f3 1ff4 


ms 


Aodboiracy 

Imln %fl Md 

m 2 ms ms 

«ti wmmi* 

*dw 


AaAtvbod fkocy 

IM9M (MfiMttt) 

}Si 12S! UI4 


Avstrk 


2 


2 


10 


n/o 


1 


2 


1 


n/o 


10 


15 


than 70 percent video piracy). 
Overall European piracy losses 
were estimated at US$ 766.6 mil- 


lilgiiw 


9 


7.6 


8.2 


n/o 


4 


4 


4 


7 


6.2 


9.5 


Cxtch Rtf. 


n/o 


50 


35 


n/o 


n/o 


6 


5 


n/o 


n/o 


n/o 


lion in 1995. 


DtumoHi 


5 


5 


5 


n/o 


1 


1 


1 


n/o 


n/o 


n/o 




FMond 


2 


5 


5 


n/o 


1 


2 


2 


n/o 


1.3 


1.3 




FroMt 


10 


10 


10 


n/o 


3 


3 


2 


48 


50 


50 




GtnMay 


510 


15 


16 


n/o 


7 


3 


3 


53 


53 


50 




Grttct 


n/o 


40 


25 


n/o 


20 


26 


19 


55 


55 


59.8 




Htnfvy 


n/o 


80 


70 


n/o 


n/o 


17 


23 


n/o 


n/o 


n/o 




IrtM 


37 


34 


20 


n/o 


7 


5 


2 


7 


7 


7 




holy 


20 


40 


40 


n/o 


15 


33 


20 


357 


321 


294 




NttUrMf 


10 


10 


15 


n/o 


9 


6 


6 


25 


14.5 


28 




Ntfwty 


5 


5 


5 


n/o 


5 


4 


2 


n/o 


n/o 


n/o 




FoM 


o/o 


n/o 


n/o 


n/o 


n/o 


22 


19 


n/o 


n/o 


n/o 




Portiffll 


20 


25 


25 


n/o 


8 


0.3 


0.3 


15 


10 


15 




Rtsfit 


n/o 


n/o 


n/o 


n/o 


n/o 


73 


62 


n/o 


n/o 


n/o 




Sfoii 


12 


8 


6 


n/o 


2 


2 


1 


53 


55 


58 




Swf^ 


5 


5 


2 


n/o 


3 


3 


3 


n/o 


n/o 


n/o 




SwHitHtiid 


10 


8 


7 


n/o 


5 


4 


4 


11 


10.8 


10 




UK 


20 


20 


20 


n/o 


3 


1 


1 


90 


112 


112 




Total Eoroft 


n/o 


n/o 


n/o 


n/o 


14 


n/o 


n/o 


756 


760.8 


766.6 




Jofoa 


7 


n/o 


n/o 


n/o 


n/o 


n/o 


n/o 


n/o 


n/o 


n/o 


Sources 


USA 


n/o 


n/o 


10 


n/o 


n/o 


3 


2 


n/o 


n/o 


n/o 


4.3 MPA; Screen Digest, August 1996; IFPI 
(1996); Europeon Audiovisual Observatory 
(1995) 

























291 



ECC 




With a piracy level of about 
30 percent, cassettes seem to be 
the medium of choice for unlaw- 
ful copying in Europe. 



4.4 Audio Piracy Sales by Format, 1992 



(•Mtrf 


LtfiriMti 

CaiwtiH 




0ln4f 
fhirt (%1 


LtflHwhCll 

mifi 

{•mrn\ 


PlrirN CP fi4h 

[>a»ti 


tlrafi CB iiOff 
flan (44] 




3J 


1.1 


1 


1.4 


0.1 


1 




14 


0.3 


t 


14.1 


oi 


3 


PiMirfc 


U 


0.1 


1 


4.S 


0.1 


1 


RUM 


44 


0.1 


I 


S.S 


0.1 


1 


ftllKt 


35.5 


1.0 


3 


m 


14 


3 


Gtroney 


S54 


1.1 


13 


list 


41 


5 


CfiM 


If 


10 


SI 


1.1 


0.0 


0 


i.-i j 

IftNM 


13 


OJ 


11 


M 


0.0 


0 


IlilV 


m 


7J 


2S 


134 


u 


4 




i.t 


0.S 


2t 


331 


3.0 


f 


Kffwvf 


4.S 


0.2 


4 


11.0 


0.5 


4 


Mifil 


u 


0.4 


It 


11 


0.1 


1 




11.3 


0.7 


3 


20.1 


0.1 


0 


Smdtfl 


4.5 


0.1 


1 


15.4 


0.5 


3 


SwHjtfM 


31 


0.2 


5 


13.7 


0.7 


5 


UK 


544 


3.4 


4 


70.5 


0.7 


1 


Ttld 


1503 


103.1 


Zt 


43i.t 


11.1 


4 



With about 20 percent in Greece 
and 15 percent in Italy, audio 
piracy in these countries is signifi- 
cantly higher than In most other 
European countries. 



4.5 Pirate Audio Software Sales, 1992 

Estimates; CD, Cassette, LP 



(Mifrf 


UffllMN 

•dtl 

(aUSSl 


nrtto 

Mkt 

(aUSS) 


M 

nIn 

(idfSS) 


m 


HriN 
mM apN 

(aSM) 


nrata%d 

aid 
ad mIh 


Avitrd 


2044 


10 


2Hi 


144 


12 


1 


IdfiMH 


330 5 


05 


330 0 


110 


10 


4 


PinHi 


1010 


17 


1037 


113 


11 


1 


FIM 


135.7 


15 


1313 


110 


12 


1 


FrMU 


1 035 4 


300 


1.075.2 


1100 


14 


3 


CfTMay 


14312 


1210 


1750 2 


1054 


14.5 


7 


Grt«<t 


415 


103 


710 


70 


10 


20 


Irdad 


414 


10 


434 


37 


13 


7 


Hdy 


4510 


1051 


750 0 


400 


11 


15 


NttlMfiadt 


447 4 


530 


7012 


370 


15 


0 


Ntrwii 


2315 


47 


230 2 


111 


10 


5 


ftrtifd 


1013 


20 


104.3 


53 


15 


0 




5047 


7i 


504 3 


510 


00 


2 


SwriOti 


320 4 


140 


343 4 


231 


17 


3 


SwititHad 


3210 


2IJ 


3410 


110 


1.0 


5 


Ul 


1,000 2 


203 


1024 5 


1513 


41 


3 



UttI IPMfl SS43 llTTil 7413 ITtI 



294 



Sources 

4.4 IFPI (1994) 

4.5 IFPI (1 994); MPA; Screen Digest, August 1 996 



I 





ECC / 




5.1 Number of Movie Screens, 1990-94 



IipiM MkviiMf OkMTvifwy EMMF 



Camtfy 


tm 


iffi 


tffa 


mi 


Iff4 


ff/nOaifi 


m4 


ilnlria 


m 


m 


3U 


304 


37f 


Atn 


355 


M|Ihi 


411 


m 


313 


40f 


411 


7.m 


351 


CikI Ilf. 


- 


- 


- 


1,145 


1.070 


42.01 % 


400 


OHMft 


347 


334 


311 


30f 


30f 


0.01 H 


242 


FtaM 


340 


333 


330 


335 


324 


1411 


114" 


FrwKi 


4J1I 


4,441 


4.402 


4,3f7 


4,414 


m% 


4,414 


Cimiiry 


3.7S4 


3,U1 


3,430 


3,701 


3.7U 


141 A 


3,47t 




500 


350 


405 


200 


320 


lilf* 


isr" 


Haifirr 


1,117 


1,025 


471 


435 


If? 


■2U3!t 


134 


IrM 


171 


m 


Itt 


1M 


Ifl 


3 MX 


im 


ltdy 


J,?fl 


3.331 


3,521 


3.547 


3,417 


I.40X 


3,100 


biiwfcwfi 


17 


11 


17 


1? 


17 


OMX 






4It 


425 


425 


425 


423 


0.47 X 


411 


Nffwiy 


Jff 


42t 


405 


400 


3f4 


■1.50 X 


137 


m.i ■ 

miM 


i.sn 


l.lfS 


133 


755 


773 


2.3tX 


100 




m 


240 


Wl 




234 




241 


Iniii 


nm 


44,551 


n7i 


2 , 20 r 


2.044* 


n/i 


1511# 


Sfiria 


im 


1.105 


1,107 


l,7tl 


l,f30 


7.74 X 


1,150 




uio 


MIS 


1,110 


l,llf 


1,177 


0.UX 


400 


SwHfwM 


m 


3ft 


3t7 


415 


431 


3I4X 


3t3 


m 


ISS3 


f,M2 


1.105 


i,m 


l.Hf 


4.11 X 


1,flf 


EU 




wu 




1Hf«7 


lllfl 


l»l% 


I3v0«a 


USA 


n,m 


24,570 


25,105 


25,737 


24,544 


3J0X 


*/* 


kfii 


LI3i 


1,104 


1,744 


1,734 


1,747 


0.75 X 


k/i 



The number of cinemas plum- 
meted in Eastern Europe after the 
cold war. 



Sources 

5.1 European Audiovisual Observatory (1995); 
European Market & Media Facts (1996) 

* Number of cinemas 
** Taking advertising 
*** Winter Cinemas; IC.I.S. 



295 



5.2 Average Number of Movies Seen per Capita and Year, 1990-94 



ECC 




Americans love the movies. With 
4.5 movies seen per capita and 
year, they watch more than twice 
as many movies as the European 
average of 1.83. 



CoMlry 


If90 


199) 


1992 


lf93 


1994 


AMftrfai 


U\ 


1.34 


US 


1,51 


1.42 


Iflgifii 


in 


US 


1.4S 


1.91 


2.10 


Czfch Rep. 


n/n 


it/o 


2,93 


2.12 


1.25 


Denniadi 


W 


1.79 


1,47 


1,97 


1.91 


FIttktid 


lU 


1.20 


1.07 


1.13 


UO 


FrpflCt 


J.15 


204 


2.01 


2.30 


2.11 


GtriMiiy 


i.n 


ISO 


1,31 


1.41 


1.43 


Grttcp 


121 


0.9B 


0.43 


0.47 


0.50 


Hwtgory 


349 


2.10 


1.41 


1.44 


1,55 


IrtM 


2.11 


2.29 


2.33 


2.41 


2.92 


Itofy 


1.40 


1.S4 


1.47 


1.42 


1.72 


UMtmbovri 


141 


1.S0 


1.S3 


174 


1.71 


NttWrlrndt 


m 


0.99 


090 


1.04 


1.04 


Morwvy 


241 


2S3 


2.24 


2S3 


247 


Polmd 


1.00 


0.47 


0.29 


0.34 


0.44 


Portigcil 




0.13 


0.80 


0.74 


0,45 


Risfki 


n/p 


399 


n/i 


3.29 


2.42 


Spofai 


2.02 


2.03 


2,14 


2.24 


2.21 


Swedtt 


I.t3 


U2 


1.72 


1.13 


1,11 


SwHtitiaid 


2,13 


2.27 


2.11 


2.29 


2.32 


UK 


1,49 


1,73 


1.79 


1.97 


2.14 


EU 


1.43 


US 


1.S9 


1.79 


1J3 


USA 


4.30 


4.09 


4.15 


434 


4.50 


JoiKm 


1.19 


112 


1,01 


1,04 


0.97 



Sources 

5.2 European Audiovisual Observatory (1995) 



296 



ECC .• 




5.3 Origin of Broadcasted Movies in European TV by Country, 1994 











mm 


M 


Attitrift 


4? 


433 


942 


hi 


1,410 


Gmwy 


1,414 


3,339 


5,955 


513 


tl,2t1 


Ihmmk 


45 


143 


341 


31 


520 




123 


929 


3,3f4 


225 


5,433 




112 


129 


402 


33 


234 


fVMCt 


444 


213 


292 


34 


903 


UK 


114 


35 


344 


43 


534 




7,S97 


m 


3,940 


199 


4,444 


ttriiMfladt 


35 


220 


733 


25 


1,013 


Tttd 


5, 204 


4,542 


15,391 


U1D 


21,126 



5.4 Origin of Broadcasted Movies in European TV by Country, 1994 

USA m%] 



Of 29,000 movies shown on 
European TV, more than 50 per- 
cent came from U.S. productions. 




Sources 

5.3 European Audiovisual Observatory (1995) 

5.4 European Audiovisual Observatory (1995) 

* = Forecast 



297 



ECC .* 




Roughly one third of all movie 
theatres in the U.S., in Japan and 
in Germany are equipped with 
advanced digital sound systems. 



5.5 Movie Theatres and Their Equipment 1996 

Number of digitally equipped theatres by country 



{■■fry 


DifcylN|N 


MplMTbMlra 

Sfrttai 


Sm| D|MHk 

MHIVi 


%amn*U 


fr«Ki 


374 


217 


40 


4,414 


GfraMiy 




45S 


IS 


i,m 


ltdy 


120 


II 


11 


3i17 




101 


IS1 


4S 


l.HO 


UR 


tii 


tss 


20 


I.Ht 


USA/(mUi 


l,4lt 


3,411 


HIO 




lipM 


If 


SOS 


24 


1,747" 


Titri 


im 


S.0SI 


I,34S 


- 



Although the number of films pro- 
duced reach similar figures in 
Europe and North America, the 
revenues of U.S. movie produc- 
tions are much higher. 



With a share of 57 percent of to- 
tal U.S. domestic revenues for 
movies, home video (sales and 
rental) has outnumbered the box 
office revenues by far. 



Sources 

5.5 Screen International; Manufacturers; European 
Audiovisual Observatory (1 995); 

5.6 Screen Digest; European Audiovisual Observatory 
(1 995) Screen Digest July 1 996; Eurostat 
(1 995) 

5.7 Goldman Sachs; Screen Digest September 1 996 

* Figures for 1 994, USA only 
** Figures for 1 994 
*** Forecast 



5.6 Breakdown of Worldwide Produced Feature-Films 





W0-7f 


IMO-lf 




CwtTfl llmUmM [irtf 1 


3,370 


3,109 


3,250 


Wtslfri Ewtff 


1.447 


i.15) 


5,754 


Ntrtli Aatrki 


tf7l 


4,555 


5,130 


iMt §f Hw wcrU 


20,555 


24.490 


11,420 


Tttd 


SSJSf 


3a^9fS 


3t4S4 



5.7 Hollywood's Domestic Movie Revenues by Distribution 
Channel, 1995 





IfVMit 


SWf 






k% 




1,175 


S7 


HiMtfkd tffkt 


1520 


13 


rtytV 


1.070 


10 


FrftTV 


tio 


1 




n 


1 


T«td 


10,UI 


It 



298 



ECC 




5.8 Time Frames of Profit Windows in the U.S., 1996 



lOK QHiC9 I 



The gaps between Pay-TV and 
Network and syndicated broad- 
cast of a movie supports the 
novelty aspect of Pay-TV. 



Horn# VMto 



Poy ptr Viiw 



Hohm VhJiii 
Stcofid 



PnylV 




Nttwofi 

Syndication 



5.9 Profit Windows for Feature Films (Example: "Forrest Gump") 

Simplified table of profit windows and vertical integration in the U.S. media 
industry. Fictitious example. 





f f odKllMi md IKftrihvHm 




Pr«d«cliii 


PfstrihiillOM 1 


NtfrtalBi II 


Tk* *tirk)il 


'hrrM Gnf ' ta |iri4id it ii 
Fvnimiiil itvifi )i HiHrud 


II 

1 

ll< 


Hi Mill piiirj ii ^ Jit iMim 
dUmn 


VUm 


mmmntrnUttMk- 


Utdkmm Uniirifl 


^Firtnt 6Mif ' h f«U to 4,041 
lUdkutar ri|ii il«f«i {Silt 


Nt*IV 


pruuyiogiir PimiiiiB 


*F«nil fitnif ' li iHind h 
hf Vliw H ii oil lyiitiiai fm 


'fvna Gh^ i daH « Ai pof n 
byttocM 


FrfrTV 


lA 'hrml fimif ' ti hi il in 

Hhnili 


Uiillii FitmhwH Nihnrk im 
'Firrifl 6«ip* H Mr priwiliwi 
idwddi 


'ftoTvl CHf ' it hU II in Off 
iiiint lyiiitiiH unrbt 



There are many more "profit win- 
dows" like the reuse of copyrights 
for merchandising via retail stores 
or shows in theme parks, which 
are furthermore enhanced by 
international windows. 



Sources 

5.8 MGM MedioGruppe Miinchen (1996); 
ECC research {] 997) 

5.9 Artope (I996),p. 73; ECC (1 997) 

* Joint-Venture with Chris-Croft Industries. 



299 



ECC .• 




Profit windows and vertical inte- 
gration of different distributional 
systems changed the "revenue 
rules" for a feature film. In 1 996 
video rental revenues were nearly 
double the box office revenues. 



Sources 

5.10 Goldman Sachs Estimates, U.S. Media 
Research (1996), p.3 

* Estimates 



5.10 U.S. Studio Revenues from Feature Films, 1994-1996 



fTMV MHUi 


\m 


% 




% 


\m- 


% 


ItsifRfi 




2m 


S3 


1510 


51 


2,570 


41 


Ffffip 


un 


47 


1450 


41 


1725 


52 




M50 


m 


4,970 


lOD 


5,295 


in 


Hmh VMm 


Piiwiifc 


s,»o 


43 


5,I7S 


42 


1,300 


11 




1,140 


37 


3,450 


3t 


3,910 


39 


Toy 


1,440 


100 


9,515 


100 


10,290 


in 


Fiy fm Ww 


DMtUk 


m 


M 


115 


93 


235 


93 


Ptril|i 


to 


i 


15 


7 


30 


1 


htd 


liO 


IDO 


300 


lOD 


245 


in 


HrVt 


Dmvrtk 


m 


47 


1,070 


47 


1,225 


47 


Foriifi 


4» 


33 


515 


33 


DO 


13 




im 


100 


1,515 


100 


1,135 


in 


MmMm 


Dwtlk 


ns 


44 


110 


42 


900 


43 


Foratp 


ns 


S4 


uoo 


51 


1,245 


SI 


Total 


ym 


IDO 


1,910 


IDO 


2,115 


100 


UtadMb 


PlIMlIfc 


m 


SS 


300 


53 


240 


51 


Forolp 


m 


45 


270 


47 


250 


49 


loid 


m 


IDO 


570 


100 


510 


tn 


OfU* 


OmbmIIc 


IS 


74 


90 


74 


IS 


74 




V 


34 


29 


24 


30 


24 


Told 


I1T 


100 


119 


100 


125 


100 


ram 


Dfiitli 




Sf 


10,154) 


57 


11,575 


57 


Fonip 


7,013 


41 


Mn 


41 




43 


TOTAC 


I7,es3 


1M 


1M7f 


m 


30,445 


110 



300 



ECC 




6.1 Overview 



6.1.1 Number of European TV-Channels, 1995 

PS = Public Service, PR = Private Service 









M/ 

iSSin 

n/n 


2*2! 


liciitbwMii 


tMdd 


WMH 


N«6««f 

oMtllMk 


CHMiry 


K 


N 




fl 


n/n 


n/n 


n/n 


nin 


Anlrit 


2 


0 


9 


0 


0 


0 


0 


0 


20-30 


CFL 

m 


2 


0 


0 


0 


4 


II 


0 


1 


30 


t 


0 


0 


1 


3 


II 


1 


0 


30 


atdbRt^. 


2 


1 


0 


0 


0 


B 


0 


0 


20-36 




2 


3 


t 


2 


1 


3S 


0 


5 


1-36 


mrni 


2 


2 


0 


11 


0 


2m 


2 


2 


1-27 


UmB 


5 


22 


53 


2 


0 


42 


II 


3 


15-30 


Cmiwy 


10 


If 


4 


3 


4 


52 


29 


0 


3-30 


GfMCi 


3 


6 


0 


0 


0 


60 


0 


0 


« 


Hwfiry 


3 


0 


0 


5 


0 


63 


0 


0 


n/n 


IriW 


4 


0 


0 


0 


0 


0 


0 


0 


6-30 


llity 


3 


f 


25 


0 




766 


14 


1 


- 


UjtMihMri 


0 


1 


0 


0 


0 


0 


1 


0 


30 




3 


10 


0 


0 


2 


114 


11 


5 


22-30 




1 


5 


6 


0 


0 


n 


1 


7 


630 


PtM 


3 


3 


11 


0 


II 


0 


0 


3 


n/a 


Psrtffd 


2 


2 


0 


2 


0 


0 


1 


0 


r\/n 




s 


S 


4 


20 


oInm/IIO 


1 


2 


n/n 


SHi 


4 


10 


15 


1 


0 


400-650 


2 


I 


9-31 


Svn4m 


3 


f 


77 


0 


0 


50 


16 


4 


6-35 


SwHitrM 


4 


1 


0 


0 


1 


7 


3 


0 


12-30 


UR 


3 


67 


11 


1 


15 


33 


9 


0 


21-60 



The number of TV channels differs 
among the European countries: 
While markets like France, Germany 
or England with more than 27 
national channels have probably 
reached their limits, others like 
Austria, Belgium, Portugal or 
Ireland could experience significant 
growth after deregulation. 



Sources 

6.1.1 European Audiovisual Observatory (1 995) 

* including regional services distributed by sat- 
ellite 

** "Open Channels", Services for the U.S. 
Army; Services with foreign torget groups 
and terrestrial rebroadcasts of foreign ser- 
vices 



301 



ECC .• 




Roughly 50 percent of European 
TV viewers can be reached via 
modern distributional systems 
like DTH satellite or cable. 



Of the bigger European TV markets, 
with more than, 1 1 0 million TV 
households, only one third (33.7 
million) receive their TV program- 
mes via cable or DTH satellite / 
SMATV. 



Sources 

6.1.2 SES; Screen Digest April! 996 

6.1.3 Coble & Satellite Yearbook (1996); 
European Television Directory (1996); TBI 
Yearbook (1996); The Media Map (1996); 
Kagan World Media (1995); IP Television 
(1996) 

* Connected Homes 



6.1.2 European TV-Connectivity, 1995 

Direct To Home/SMATV and cable connections as percentage of TV homes 



Cwwlry 


DTH / MATV (%} 


CaUt(%] 


3itd (%} 




32.4 


34.5 


66.9 


Itlglwm 


U 


89.3 


95.7 


Citfii Rtp. 


m 


11.0 


27.8 


DffHneHi 


422 


22.5 


64.7 


FMoffd 


U 


40.4 


46.7 


Fronct 


5.0 


6.8 


13.8 


GffnMNy 


m 


47.8 


77.4 


Hungary 


22.? 


36.8 


59.7 


Irtknd 


9.2 


47.2 


56.4 


ltdy 


24 


0.0 


2.4 


UieiilHwrg 


5i 


90.2 


95.8 


Neriitrloidi 


47 


93 


97.7 


Norwo| 


17.0 


34.7 


51.7 


Pdoid 


1A.1 


23.3 


39.4 


Portugal 


1.4 


0.0 


6.4 


Sgabi 


6.3 


3.5 


9.8 


Swt4f« 


17.7 


44.7 


52.4 


Swlttffkiid 


7.4 


63.1 


90.5 


UK 


16.4 


5.3 


21.7 


Total Etirogt 


2S.5 


22.4 


47J 



6.1.3 Cable and DTH Penetration in Important European 
TV-markets, 1994 




302 



ECC 




6.1.4 Satellite Distribution in Europe, 1996 

DTH & SMATV homes 


CMMrtry 


vitoilMtf 


Avstrta 


m 


Itl9lifi 


m 


Cztch Rtf, 


m 


Dtnmirk 


1.02 


FiAM 


0.13 


FruKi 


1.03 


GtriMMiy 


10.00 


Htitfory 


0.02 


Irelmd 


0.11 


ltdy 


m 


Liximbtiirg 


0.02 


Nttbtrionds 


0.2? 


Norway 


0.39 


PttloMi 


\M 


PsrtAgal 


0.26 


Sf«iii 


0.79 


Swtdtn 


0.70 


SwHitrlaiid 


025 


UK 


3.79 


Tttd 


23JS 


6.1.5 Forecast; Number of Cable TV Subscribers by 2000 

Figures in millions 





199& idHCfftori 


2000 prt|Ktarf tilicribirf 


FrofKt 


2i 


6.2 


Gtimniy 


17.5 


W 


ltdy 


0.1 


2.1 


Sfdii 


0.6 


19 


UN 


2.1 


6.0 


EU (+ SwUiirloiid t Norway] 


40.6 


S6.6 


Jopwi 


11.0 


16.6 


USA 


61.0 


65.0 



In 1 996, TV programmes distrib- 
uted via satellite reached 23.75 
million homes in Europe. 



The number of cable subscribers 
in Italy Is expected to soar twen- 
tyfold over the next four years. 



Sources 

6.1 .4 Astro, Screen Digest October 1 996 

6.1.5 European Commission (1996) 



303 



ECC 




The massive worldwide integra- 
tion of different distributional 
channels for media contents be- 
comes quite clear when looking 
at the range of activities of the big 
four American media companies. 
Their activities range from broad- 
casting networks and stations to 
theme parks and retail stores. 



6.1.6 Comparison of U.S. Media Company Profiles, 1995 



V)«Mi / PvflMMt / IlMUHiw 1995 


1«fd R«VfM 


USSllUIbi 


iKMt 


IASM93U. 


hnwTMSM 


m 


f«rdfi 


TV PnJKiiM & Dliiribvi4«t 


PteVICHHt lUtvbfll DhItAuAm 


Flm liijnwiwid, fdwiwi tawivid 


Ires4ttfhig StaHm 


UnMl fapiiwl IMmpIi (SO %\ 
MTtrnm 


m mA^hirn {(mmmf, 




SHaKiiim, Thi Jtoiii Quml, ilY Milwftv, VH-I, 
USA NitwA imi NkfciMHi, Nid IT Mto, fU)t 
Obwd, Chh^ CMlrd (SO %l UrifaM |» %} 


MTV HMMfb li Ah. Eunpi, Lflii 
Nid(iiiiHn VI, (S0%), Niimiit Oktmid (UX, 
25%),inilUI. 




Krtptt. Md^ 


(13KI dl mr mrW 


VUw 


1,021 UocUtfilir fdm OirtrtiiiiMi 4 Slom 






nocM Hm W|in lalifidwi 




TIimn Nrk] 


IMfond JhHiHiMit Ptaki 





Ntwy Cor,. / MC • C^Otiti 1 995 
fiMirtri mijlghtt mi loowt— It 


TudRtvtM 


US 111,9911 


iMHIt 


USS3l7bl 


hittfliiOTli 


irs4 


Nrtifa 


TV PfidwIiM 1 (HtirihMiM 


Wdl OhHT TV friJaitiiB 
idi[AmrlVOisH«iiii 
IwiaVklt 


TVlIiiilif TV (Fnm, lUlt Ut- Mmidii lOBrnMijt 

mi kmtt iSf^ mi iflMA IU.X so%) 




Aflwwi •ftMnsiii Ca (AK| 10 TV UdioK 


IR 2|U.m Srfflt m |S0%1 IM 3 12S\) d mG« 
Rwy, luTBiiwI |33%t ImfBil hm (lOKt, OlHV 
(UX, mi SIS 4 (MdwMl, SHdMvta M 
nidi Sf5tMi (23.S%i SpBTd OHud (20%) 


t. M-* i-- 

LHIt 4 MnHt* MIWMU 


Dfaiiiy (M ESra (mi ESPN I (N 
Unisim (SO %ik%g NMiiiHt W |37i %\ 


Hit Dsaty OhmI U.X, Hw IHiaiT {hwd tdavi, 

lb PtiRBf Ownd tanMiiy 


riHid tiTirMHMl 


MMr Dhiirr Pklitti, Twdntm PkitrH, Cvtw 
PS^^ir tt, IIAif b^rq h Dwflty 

TSitipkd PtRdBdtvtt, Or^ 


iMiit Vqh iRUntfdnd (XibudMifl^ d utr 

da wU 


VMm 


Iwm Aili Hhh Vdit 


h— Ihli WiniBiwdl DitJiMia Bftn dim 

iBwd 


Ntw RUdii 


DiSHyimiKMK 




ThatPirli 


Dwitraard (FL)^, UbhvM ICt) 


(biByaiiU to bn, Frami 


CiMMir Prnincli mi 
i«fgd Start! 


OflHI^ SAT^SB' S^BTB! OflflBf CoWtt^^lBr 


DiiRfr SAdto Storn nHMi 



304 



ECC 




TIm WmMf / TtMutr Iroodcoitliig I94S 
FImkM HlflliotitT Mtd l«v«fl*Mt( 


iHdRtVMMt 


US$21, mhi 


OpwiHn iMt 


US$(M)bI 




USA 


Finifi 


TV RtiAkIIw ft OhHftvtiM 


UriMr Uificlirn Wvmt Im. TV P^iAkIm. 

m ■ — fw L 










IrMrfctf Hif StttiMt 


Tin WvMr Irn. IMatHt 
WnSSifiiSliftM 


■4» (4979%), VTVA I nd VTVA 2 (191%), Mi^TV 
(2) 42%), HnAnt 1 (74%) d U OmMiy 


Cikli ft Sctditf IMiraHii 


Him In Oria (MO) / QmmUIm YM On. CmI 

TV (33 %) CimAt CnN (51 %), E 1 

(49 %), Si|i OwMi (33 X). Midt iKirliiwwl 

inltt (TCM), Tin (irliM Hilvirk, (iMi Hm 
tkhmk (CRN), CNN Mtm Nm, CNN Airpnl 
NnnfiOHHi 


HN Hnivy (50%), HIO Qidi (40%), HN PUnd 
(40%). HN An. TV 1000 (ScnAnUn 37 5%), CM 
lutimtiinl, TNT litifinHiinl. VNmir Irn. TV 
(MTV) UM Amoci. WITV U L. MTV Gnmy. 
MTVAnanAi 


RMliNndMMt 


PIMlb rnMRMV MMNIMB9R, 

UnQnM.(nAilMk [mrlBMiiH.TirM 
FldMi. Tww Fnliri 


Mrw Im Distrftiiii UNcn dl «md In nrU 


VUm 


i«nr Nnn VUni T)m III Vtfni Twnr DmkIc 

Him VUm 


Ml n U M 1_ _ AAt ^ j ▲a AJ 

Wmi iW. MM vMi MCfl M mMH M MM 


Ntw 


TW M SnUn NilMi Tnnr Hm MiIm 




TWm NrRi 


5ii Hi| TTwm Inks (49 %). Wrar Irn MmU 
VM4 


Mm lin MiUi VVUU U Anirrfi, U JL. 
Gnwy 


Cww— f Pr^Kti mi 
Icldl SNrti 


««- - a,— f«- A- *» » 

9^y«| 

ind&tn 


Wvnr Im. SliAi ilim dl mr In nrid 


NtwiCwpwaH«l99S 
HmmU Hlghlf^t mi tavttlMMtt 


btd R»vmm 


USSI2.17SII 


Op<ratlii| Ikmm 


US SI 491 II 


ImttMafi 


USA 


Fmip 


TV Pre^tcliM ft DktrMw 


^ g g.l_. j_i._ 

flMHOT LflWy fV VlMHMHi HVWHH 




IriiicuHiH SitfItM 


FfilmlasipCMpnr 


Vn (CwMiHf. 49 9%) 




l¥ fW NVfOWi 

l2HnrW«USMw 




CikliftScfdltf NHvwIt 


ASM W). StyMO (^) fK (Sni. hH (50%), 
Fn Sprti Hil (5(i%), Fn Sfvh MraiiMl (50%). 

Fn Nm CiUi, Fn 04Mrn'$ hAnHi 


ISM (U 1. 40%), iSAy Upn). SM TV (Adi), Zn 
TV (Adi, 49 9%). SAy Ennldnmd LiNi Immia 
(30%), (wd Fn (lifU Aaifki, 50%),Fiilti 
ikttn/k. 50%), Qnnd V (HiM«ft $0%) 




TanMli Cnliry Fn, Fn 2000 Fn SnrdAfta, Fn 
FnUy FOm^ Fn /UlMln SliAii 


DMftiindTiciidIniftAinfU 


VMm 


knMliCMlnyFOlVUM 


DWriAiftn dNai dl nw Im nrld 


NtwMidh 


D#i ininp SirUtn Fn iniricfM, M 


Nm MilUNdU, Nm OUkm (AiIi U X) 



Sources 

6.1.6 Artope (1996), p. 32; Annual reports 
(1996); ECC (1997) 



305 



■■ ECC .• 




Always the same old movies: With 
only 27,000 feature films and 
about 118,000 TV episodes or 
movies, the stock of successful TV 
and movie programmes appears 
to be quite small. 



6.1.7 Estimated Size of Film Libraries owned by U.S. Media 
Companies 



CMipMy 


Foftiff HhM 


WWrrllMII 


Tlmi Wonwr / 


l50W«ft9flro$.Trtit${bifi)rftl9S0) 


16,000 IV-tpisoiln 


ns 


3,200 Worrar Iros. Trrtti (after 1 950) 


(WotnMRros.»MGM) 




2,200 Mf^MTirieidnfort 1916) 
700RKOrft1«$ 

3,000 Hanno lorbiro torloons |Holf-Kour) 
3, 500 loomy Tunes ond Merrv Mtlodves 
1,050 Hvm Bros. 1 MOM Carlwis 
1-14,500 Thlti 


1 . 26,000 


DIfiiffy 


SOOTrtlts 


n/t 


ViacoM' 

Panmievfit 


2,400 Titlfs 


60.000 n-tpiudK 


Ma/ 


imm 


20,000 


Univirial 




1,250 MavwigfthaWMk 


Sofijf 


2,700 CoKjinfan / TriStur Trtlfs 


30,000 IV-tpiudK 


Niwf Corp. 


2,200 Twnlierit Cwrturif Fax Titles 


iVo 


Total 


27,000 Ffotijri Rims 


II 6,000 TV-iplMxIts, 
1,250 IV-flWYi*s 



By comparing all revenue sources for 
TV, the size of Pay-TV revenues 
becomes quite clear. Out of the 1 60 
million TV households in Europe an 
estimated number of less than ten 
million Pay TV subscribers accounted 
for 1 4 percent of Western European 
TV revenues in 1994. 



6.2 Revenues & Prices 



6.2.1 Estimated Breakdown of Western European TV Revenues, 1994 



Sources 




(SUSbU 


(%) 


6.1.7 Variety; Dempsey (1996), p. 67; Johnson 


Advefflfbig* / SpoatorsMp 


m 


43 


(1996), p.l and 52; Everschor (1993), 
p.538; Wasko (1994), p. 62; Koselka and 
Lane (1995), p. 46 
6.2.1 Goldman & Sachs (1995) 


\km§ Fh / GevtfMNt. Fin^big 


115 


33 


Pay TV 


4J 


14 


Other 


3.4 


10 


* Includes advertising on government owned 


Tetd TV ftevewn 


34.5 


IQO 



channels 



306 




[fMnJ[|M|fin{|f I J 



•• ECC .* 




6.2.2 World TV-Programme Prices, 1994 



Ni|WB»MMla|ilf lypa 





ymmrn- 




TVMN 


CMMi 




liAitim 


WIpg— Wirfbn 


mrntfm 






as 


fi 

I 


miNrlM 


•AM 








im im 


HJH IMi 


m-m 


ii m iim 


im HHO 


im im 


am H.m 


S.MI 


I .IN 4.N0 


mm 


mm 


i,m 15N 


im im 


im am 


A two 


mo UO 


m i,m 


m 1.750 


IN H» 


mm 


tJN HSN 


Z.SM 


HON t.SN 


im im 


mm 


rm i.m 


im im 


4,m im 


im 


mm 


im %m 


mm 


UN im 


im UN 


4.4N ti.m 


tm »m 


im iH« 


mm mm 


mm ti.m 


s.m mm 


Iim N.m 


am >d 


im mm 


It. ON UNI 


1 

1 


mm imm 


iSM is,m 


am am 


»,m Id 


im Km 


mm 


3.m om 


im HSN 


IN im 


1.5N iSN 


im am 


mm 


mm 


mm 


i.m im 


mm 


mm 


im im 


\,m im 


mm 


m i ,iN 


im im 


mm 


im im 


tm im 


IfllM S&.IM 


4.IN I0.0N 


m m mm 


i».m mm 


im um 


im am 


am Id 


\M im 


m>l,NI 


mm 


im 4m 


m i.m 


mm 


i.m im 


im^m 


tIN HON 


m im 


im i3.m 


ISN 3.m 


im m 


sm mm 


mm 


I.WO HSN 


mm 


im i,m 


I.m I.m 


mm 


4,m im 


m \,m 


IN 7N 


m \jm 


m Hm 


mm 


ISO I.m 


im im 


mm 


l.m I.4N 


im m 


H.m im 


I.m i.m 


im im 


im am 


mm 


m INI 


mm 


IN im 


175 im 


NO im 


m im 


i,iH mm 


HNO imo 


nm mm 


ti.m mm 


3im io,m 


i.m Iim 


ism^ lam 


HON itm 


H1Ni.NI 


Hm im 


im iim 


I.m im 


nm iSN 


im am 


im m 


LW 4.0N 


mm 


im lom 


im im 


im im 


i.m am 


Kjm mm imum 


mm 3HNI 


I 

I 


1 

i 


ION K.m 


Iim am 


am Id 


im nm[Orni*\ 


- 


- 


- 


- 


- 




3,m miNMii 


- 


- 


- 


- 


- 


- 


HON WIW 


- 


- 


- 


- 


- 


- 


nm ^mm} 


urn »,m 


mm !i,m 


1 

i 

i 


Iim H.m 


lom am 


Iim mm 


mmi immicMnNi 


im nm 


mm M,m 


3s.m i7i,m 


i.m am 


ii.m am 


am Id 














MpTlId 


mm 


im.m lu.m mjm i 


Id 153d 


am m.m 


iN.m 4iem 


Id tlld 


HlNi -l 3S«i(Pir M 


iN.m Him mm (.TIN 


Id Hid 


am liSN 


am lam 


Id llld 


\m 


m mm 


m 


nm-ii5d 


I.m 7im 


l.m 7iSN 


1 .m Hlld 


3HM 1NIN(mr“ 


im mm 


im mm 


i,m mm 


i.m ism 


m n,m 


tm am 


1 

1 

i 


mm wt^ 


mm i«im 


rmm lofid 


leun Him ia.m iiom mm iisd 



TV programme prices are highly 
adjusted to the potential number 
of viewers and the financial capa- 
bilities of each country's TV 
stations. 



Sources 

6.2.2 TBI Yearbook (1 995); TV-World (1 995) 

* includes only CBS, NBC, ABC and FOX; 

** Over 40 million subscribers including TNT; 
WTBS, Discovery, ESPN, MTV, Tbe Nashville 
Network, Family Channel, Lifetime, A&E, 
Nickelodeon, CNN and others 

*** Sales per station; often shows sell to up to 
too stations, prices may vary also by mar- 
ket size 

**** combined cash and barter pricing. Prices 
vary widely both between different markets 
and within each market, according to time 
slot and distribution 



307 



ECC 




















6.3 Pay-TV 


With 13.85 million subscribers or 
less than ten percent of the 1 60 mil- 
lion European TV households, the 
European Pay -TV market should be 
prepared for further growth. 


6.3.1 Pay-TV in European Key Markets, 1996 




Ctwfry 


OmmiI 


NMiAtrtf 


Ownon 




Iflgkin 


(anal plus TVC 


180,000 


42.67% (ml rks, Bwiotui Pay IV 25% 








Hlmnet 


200,000 


100% NolhoM ' 50% Ikhwnont, 












42.7% Muhidiakt Intornotional HoMln|s 






Dtiioffc 


Rlmnel 


90,000 


IOO%N«)hoM 








TV 1000 


35,000 


62.5% Kimwvil, 37.5% finw Womot 






Fromt 


(ondplus 


4,100,000 


100% (onol Plus 






FycMd 


TPS 




25% in. 20% Franca Tilivisian. 5% Fronci 








(iiUImkM 




IiM(ani,l0%CIJ,20%M6,l0%INP, 












10% lyonnaisa dts Faux 






GtriMMy 


Rlmnet 


65,000 


l00%Ntllwld 








Pretnieri 


1,200,000 


37.5% hrtilsinann UFA. 37.5% (anal Plus, 












25%IQi(h‘ 








DFIOmkMMt hi 


20,000 


5l%Kirdi.4m5liyr' 






Itily 


Ititpiu 


850,000 


45%Xk(6.45%llariMld.lO%Fininvisl 






NftlitrMs 


rrl . 


190,000 


100% NnhoM 






Morwoy 


Rlmntf 


70,000 


IOO%NellicU 








TV 1000 


65,000 


62.5% KinntvA. 37.5% Timt Wornor 






Swf^M 


rdmn.1 

rwnfiti 


200,000 


IOO%NellKild 


Sources 

6.3.1 HSBO, James Capel, Financial Times, 
September 9 1 996, Medio Perspektiven 






TV 1000 


200,000 


62.5% Kinnrfft. 37.5% Funi Wonnr 






(onoi plus Espono 


1,200,00 


25% (anal Plus. 25% Prisa. 15.8% IIV, 
13.8% Grupa lAotch. 20.4% orinrs 


7/96 

* BSkyB hopes to obtain a 25% stake - 
12.5% each from Bertelsmann and Canal 
Plus 

** BSkyB withdrew it's plans to invest in DFl in 
March 1997 




UK/ktM 


ISkyl 


5,200,000 


40% Nows (orp.. 1 7% PonlliA, 4% Poonon. 
10.8% Granada. 28.8% orinrs 











3M 



' ECC / 



6.3.2 Pay-TV Penetration Rates in Europe, 1996 



CoMtry 


NMibwtITV 
ImosoImMi (mFo.) 


NMibffofPoy-TV 
fokicrl^i (nit.} 


Pay -TV pontlrttkHi 
rvti (%) 


IfIgliM 


3.792 


0.200 


5.27 


OtMiMfIr 


2.311 


0.125 


5.34 


Fy«id 


2.230 


0.06S 


2.91 


FroMt 


21.052 


4.100 


19.48 


Gtrnmty 


33.396 


1.207 


3.60 


Itoly 


2tJ.543 


o.aso 


4.14 


NitWkndt 


6.474 


0.190 


7.93 


Norway 


1774 


0.135 


7i1 


%m4m 


4.007 


0.400 


10.00 


Sfoii 


12.077 


1.700 


9.98 


UK/lrtM 


23.S29 


5.200 


72.10 



6.3.3 European Nethold Subscribers, 1992 - 1996 

In thousands 







1993 


1994 


1995 


1996 


ItifWx 


707 


255 


324 


381 


376 


ScMAMvki 


344 


347 


374 


381 


376 


Italy 


77 


739 


493 


646 


788 


Ctiitril Ivropt 




- 


- 


- 


47 


Tatfil 


623 


141 


US3 


1,140 


1,527 




Britain and France are leaders in 
the Pay-TV field. With a penetra- 
tion rate of about 20 percent, they 
demonstrate the growth poten- 
tial for other European countries, 
where figures are much lower. 



French Pay-TV Canal+ decided in 
September 1996 to spend 35 mil- 
lion ECU on the European TV assets 
of South Africa's Nethold. Nethold's 
parent companies (Richemont and 
MIH) will take a 20 percent stake 
of Canal+.Thus Europe's largest 
Pay-TV group will be created, com- 
bining 7 million subscribers of 
Canak and 1 .5 million subscribers 
of Nethold. 



Sources 

6.3.2 Financiol Times, September 9 1 996; Kogan 
European TV Country Profiles (1996); 
ECC (1997) 

6.3.3 Nethold; Canal Plus; SBC Warburg; Screen 
Digest October 1996 



309 



ECC .• 




Pay-TV revenues are skyrocketing 
in most European countries with 
growth rates between 10 and 70 
percent. 



6.3.4 Revenues of Pay-TV Channels and Monthly Fees 







\n\ 


iavtaMik aMit 


icu 

ItH 


♦4/93 


Mvfp TOT 

ml ifw 
(hECU) (bEOI) 




0.3 


o.s 


3.3 


4.7 


9.7 


44% 


20.5 


221 


IflflHi 


















CHltMilVi. 


?.3 


14.4 


20.4 


392 


49.0 


15% 


34.4 


25.1 


FlwNtl 


\U 


19.4 


20.3 


39.5 


55.1 


411 


24.4 


24.5 


SwIfiarliM 


















Titadah 


U.S 


14.9 


10.9 


30.3 


22.0 


12K 


19.1 


20.2 


Tahriw Bwiadii 


3.1 


3.4 


2.5 




- 


- 






Cjidi 


- 


- 


- 


- 


0.0 


- 


- 


4.1 


GmumiY 


t.3 


43.1 


105.3 


142.4 


320.1 


3451 


21,1 


23.3 


OwMrk 


4.9 


7.3 


12.3 


17.7 


21.4 


5551 


24.0 


331 




3.2 


504 


134.3 


102.0 


239.7 


32 51 


0.0 


22.3 




4.1 


7.5 


0.3 


7.4 


14.1 


94 5E 


10,5 


32.4 


FrvKt 


I70J 


904.1 


1.044.9 


U03.5 


1,317.3 


1051 


25.5 


25.7 


Ui 


















Ik Mavlt QmmI 


41 


31.5 


44.1 


40.5 


74.9 


m 


154 


19.2 


Sky AtvWt 


1M.7 


1(7.1 


112.3 


107.5 


120.4 


121 


(5.4 


19.3 


Iky MiTlMtlliC 


- 


ISi 


245.0 


314.4 


573.0 


a% 


21.t 


25.4 


Grttn 


0.4 


(.1 


1.3 


1.2 


12 


051 


- 


17.4 


Hanfvy 


- 


0.0 


2.3 


4.0 


102 


7051 


4.9 


4.( 


Wr 


- 


li 


4I.( 


(15.4 


(71.4 


4151 


(9.4 


111 


itrimU 


17.0 


22.4 


21.3 


304 


55,9 


4451 


25.3 


27.9 


IUf««y 


3.4 


5.3 


7.0 


7.4 


(1.0 


4451 


(91 


21.7 


ImdN 


















nkWrt Scwiiwla 


33.1 


40.4 


57.4 


45,2 


44,1 


4151 


19.4 


271 


TV1«0« 


10.3 


27.6 


40J 


57.0 


4(0 


t% 


10.4 


11.4 


FMiJUi 


- 


- 


0.0 


0.9 


(5 


4351 


9.0 


9.7 


TVIMetFMki 


- 


- 


0.5 


7.7 


12.4 


43% 


20.7 


30.4 


IFWi<4 


7.3 


- 


- 


- 


- 


- 


- 


- 



Sources: 

6.3.4 European Audiovisual Observatory (1995); 
OBS; Screen Digest (1996) 



110 



■ ECC 




6.3.5 Western European Pay-TV Revenue Growth, 1995-2000 



iTiiltion U5S 

Oigitol Ptiy TV 
I Anologue Pby-TV 




ms im m; ms \m im 



Pay-TV revenue growth in Wes- 
tern Europe is estimated to come 
solely from digitally distributed 
Pay-TV by substituting analogue 
Pay-TV systems. 



6.3.6 Pay-TV: Value Chain with a Single Programme 









bcMpil 


1 


Mftwid llrfiiitrKlvri 


Provyng tromf*r mvktu ml 
chonmls It g. tsUi, 

wiilftii} 


CaUi systtm providors Hi 
Dtutsthi Ttlfkom or soMliti 
providin Ho ASHA ord Eutofsol 


2 




PronAng ndwofk ufiwts Hii 
lilighony or ISDN 


CflWo siots oruoidi sysluns or 
lran$|Kindir ti^iatm on soh^ 


3 


CwtMt 

(P^tfTHNM pr*4w1lMI 
AsIrftttiMi) 


Production of fwturt films tnd 
TV'forin for Frn- tnd Ptoy-TV, 
vwnvnoi oiuinuiwn 


Ptodudkm of Torrttt Gonp' by 
fOromount flt1iirts> dMultd to 
0 PoylV thonml 


4 


VdvrWM StTYkti 


|r«odce$Nng of fovluri films li o 
fbrtd progrommiiig schidulo, 
brodcmtir Otis os D schodok 


Cond Plus broodcDsts ih fouturi 
fims in t fixid doily i/Mnk 




Strvki f rf vkb| 


Dtsiribiilion ond niQintMNMtt of 
dicodirs, invoking ond custonur 
sorvki 


Cond Plus dbtrkOfs ond 
nwinioins iH dicidirs bt 
tiopirotion iritl*i rttoiors ond 
fionigis subcrkfs 


5 


CfWPMf Ifvkti 


ProducrioA of tovoonw dtvkts 
sgodficolykPiiyTV 


Production of SECA dicoiks for 
(ond Plus 



With a single programme, the Pay- 
TV value chain consists of six dif- 
ferent levels. The (mostly analogue) 
single programme services don't 
offer much variety for viewers or 
opportunities for growth, as the 
channel capacity is limited. 



311 



Sources 

6.3.5 Interspace Consulting; ATM (1996) 

6.3.6 Booz Allen & Hamilton (1 995), p.39 




ECC .• 




Sporting events are one of the main 
reasons to subscribe to a pay-per- 
view programme. But most of Mike 
Tyson's fights didn't last very long. 
Due to the high costs of sometimes 
more than 50 Cents per second, the 
number of Pay -TV viewers dropped 
sharply. The channels replied to this 
problem by a new pricing model 
offering more fairness. Tyson's last 
fight was long enough to appear 
reasonably priced for Pay-TV at only 
0.2 Cents per second. 

With multi-channel packaging, the 
Pay-TV value chain consists of seven 
different levels. The mostly digital 
services offer a variety of programmes 
and packages ("bouquets") as well 
as plenty of financial opportunities 
for the provider by either running 
their own broadcasts or reselling 
channels to other programme-sup- 
pliers. 



Sources 

6.3.7 Kabel&Satellit 11 November 1996; ECC 
research (1997) 

6.3.8 Booz Allen & Homilton (1995), p. 39 

# estimates 

* Depending on the way the fight was 
ordered. (Via Telephone or DSS Remote 
Control) 

** Cablevision (with 2.8 million households 
connected) offered the following pricing 
model: The first round cost $ 9.95, each 
additional round cost another $9.95 till the 
final price of $49.75 was reached. Any 
further round was not charged. 



6.3.7 Pay per View in the U.S.: Did Mike Tyson Fight too Fast? 





NrTVviHMn 


UHfhvf 


CMliiOX 

fwrVKhmmk 


C»fts pvr N«vdl 


Ummkm\LL 
fVy>IV ffPMni 


Ty»w VI. Pttvr Mwly 


17 Million 


1:29 


$39.95 S49.95 


S0.44-$0.tt 


68 fn 85m 


T|»m VI. tvilvr Mvikii 


1.4 Million 


B:32 


IfDodcosI fri« on FOX 


TytM VI. f rMfc IrvM 


n/o 


6:50 


$39.95 -S49.95- 


S0.09-S0.r2 


t|/o 


TytM vs. Icict SvUm 


1 Million 


1:49 


oppx.$40 


S0.37 


appx. 40 m 


TysM vs. f v«i4vr HilYfivU 


n/o 


33:37 


vp to $49.75" 


S0.02 


n/^ 



6.3.8 Pay-TV; Value Chain with Multi-Channel Packaging 



VditOMliSttf 


OmoVHm 


bOTpli 


Nf twtrk faifrostnKtvrf 


Provtdmg tronsfic sifvkts and (ton Coble systtm providin Mti 
nek (e.g. fiberoptic coble, soteltHes) Deutsdie Telelcofn or soteite pro- 
viders Idee ASTU ond Eutekot 


Nftwork ■rdrfftctvrt 


Providmg network services Idee tel- 
ephony or ISDN 


Coble slots on coble systems or trons- 
ponder copocities on soteites 


CoatMt 

{froqrwmm pfo4icHow 
ond dbtrfbvtkMi) 


Production of feoture fdms and Production of forrest Gump' by 

lY-series for Fret- and Poy TV, world- Poromount Pictures, distributed to 
wide dktribution o Poy-TY chonnel 


w-l--- -JJ-J 


Progromme scheduling of o brood ISkyl offers o dktribution plotform 
coster now offers vorious nkhe chon- for ddferent nkhe chormek thus 
nek which ore pockoged os multi- chonging the troditionol 
chonnel options broodcoster's progromming task 


VoWt-ndM Strvktf 


Former progromme suppliers 
oct os broodcosters 


BSkyB octs os 0 broodcoster with 
its own chonnek Mee Sky Gold. 
Additionolly, progromme suppbers Idee 
Poromount turned broodcoster with 
thekTAUMOUNTChonner 


Strvki Providbig 


Distribution ond mointenonce of 
decoders, invoking ond customer 
servke 


Conol Phis dktributes ond 
mointains its decoders in 
cooperation with retoders ond mon- 
oges subsaiben 


Cmswmt dtvkts 


Production of consumer devkes spe- 
(ifkoly for Poy-TY 


Production of SECA decoders for 
Conol Plus 



312 



ECC / 




6.3.9 Rollouts of Digital Bouquets in Europe, 1996 







mm 


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41 


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lf% 


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m 


II 


imi 






iffn 




akHdM 


abMM 


1 


abMM 








mn 


iwftdnH 


VA 


hbMM 


» 


abiaM 


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HfH 


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Sm 


H 


II 

CiE 






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■ HIM 1 


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ASM 




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Mb Mmm 


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m 


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ilhiMa 


Ufa 




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n 


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HI 


jatt 




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IM 


n 


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Hill/a 




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(Um 


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{pianiPiM 


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14 


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litii V 

Mlhi/IM 




Iff; 




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toN 


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a 


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M% 


tetTVIF 


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a 


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RM 


41 


HII.Mi 


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a 


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4S 


tr|Ni« 


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m 


mrnM 


l/l. 


akMW 


1 


abMb 






I/A 








abbM 


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im 


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bbMM 


H 


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IfN 




SKA 




» 


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AIM 




UlflM 


CHmuh^ 


\m 


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ab^M 


N 


abbiM 




IMI 




\m 


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abHiM 


ab^M 


9 


ab^ 


m 


MM 


KM 


Odt; 


MilA 


Im IMm 


ab^M 


ISH 


abMMi 




M 


nCMM 


IK7 


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1 


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W 


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imn 


tovMl 


bbMM 


abM 


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abMM 



The on-going rush for digital 
television and multi-channel 
packaging stretched the imagina- 
tion of many broadcasters. In 
1 996, at least 26 plans for digital 
TV bouquets were announced in 
Europe alone. Most of the services 
are conceived as Pay-TV channels. 



Sources 

6.3.9 Screen Digest, August 1996, p. 177-184; 
ECC (1997) 



313 



ECC 




Narrow targeting from "American 
Movies" and "Automobile" to 
"Parliament Channel" and "Wo- 
men's Interest": European digital 
TV channels try to cover all 
formats that could potentially 
interest viewers. 



6.3.10 Digital TV: Composition of Bouquets in Europe, 1996 

Projected channels in italics 





JX 


rik k 


IMC 


r ir 


hriiMn 


<mrn 


(idJ 




Wl-V 


Ifartt 


dy»4i(pip» 


y«i. 


ta 






mmbrn 


Uteiiii 


MttMk 


KK 


Om^lm 


iknh 






tihM/imli 






tme 




OiCMi 



mm 



m VI 

ITKftmfl m 
fmmlrnfV 

Nvilb 

KtrKtm 









Diiyw.skr 

mmv ncFta 

oic am. 






SkrSfwfttiU 



Off 









$kTi>X- 



(mmm 


(tfltm 

IkjiApi* 




|4HI 

VawrdHHl tbmmjOrnad 


OkiWuiii ttmiil 




ma\ 


mm 











XOMX 



TU 

mmt 



Sources 

6.3.10 Sequentio (3/1996); ECC (1997) 



314 



ECC .• 




7.t General 



7.1.1 Overview 

7.1. 1.1 Pyramid of Entertainment-Productions 




Content is king: all fields of the 
entertainment pyramid depend on 
the production or distribution of 
content by using the rights on 
original ideas and/or the per- 
formance of creative people. The 
availability of technology also 
plays a vital role. 



7.1. 1.2 Comparison of Relative Production and Reception Costs 
between Traditional and New Media 

Start up costs for consumers as a mix of fixed costs and variable costs 




Rising production costs: a multi- 
media production differs from tra- 
ditional media especially in terms 
of high production costs, post-pro- 
duction (-costs) and material value. 
Signal Economy: although the 
costs for the distribution of data 
are falling due to high-tech media, 
consumers have to spend more for 
expensive reception equipment. 



Sources 

7.1. 1.1 Swientekjriedrich-Ebert-Stiftung (1994); 
ECC (1997) 

7. 1.1.2 Swientek, Friedrich-Ebert-Stiftung 
(1994); ECC (1997) 



315 



ECC .• 




Most enhanced interactive services 
are still in an early stage of devel- 
opment. Consumers will finally de- 
cide in which of the many different 
potential areas interactive services 
will succeed. 



7.1.2 Trials 

7.1. 2.1 Classification of Enhanced Interactive Services 




Sources 

7.1. 2.1 EIT0 (1996) 



31 € 



' ECC / 




7. 1.2.2 Development of Interactive TV-Projects in the U.S. 



f ktr GMWifiM 


StCMil GwtnriiM 


TMGtMrtlfff 


FfvrHi GfMTiliw 


(Mrty tifarhMati) 


AMlifw If Mfltd 


Fily 


litwitf/MIIOS 




* AOV/WKtioki 


• AmorM/dNrM 


High i|Md Idfrtit Aconi; 


(19SM957} 


• AmorilochAtirlin H. 


* Id Aiontk/kilivt 


* AnurHicVlBM 


* ATIT^imt^Dtidfl of 9 
pkluri Miphono 

* QuIm »xp»rim«nh in ifw 
1970t 


* MAfbnlk 

* InIffotHvt PlifinrI 

* IntffKHvf Syiltim 


Slorgozif 

* III South/iMonlo 

• OiKOrtryOTf/MonSltifi 


• ATUWMdnfl 

• Id Alinnlk 

• Id South 


* Aspm Movn iiKf 


* ECHHlVinsiw} 


* InlfTOKK/Conl Springs 


• Cwiwnli 




* GTE/CvrHos 


* ftttjkUi 


* POcHklil 




* Ikiit Worntr/fkMinhjini 


* Snrfh lint Id/Rkliord^ 


* TOtOhomif 




Chonnil 


* SpiiniiAifaki Fornst 


* Fira VfariNr (bod lunfMfj 




* SOM!T/H«tlwdD. 


« TG/HortlwdCf. 


* USW^I 




* VlMom/Cosiro Voity 


* TCI/Mkrnso#/UdfiM^ 






* Vifiw (fnftdad TV 


* fini Wnrnir/511 


Mkf tvtfflirf Mihlpikil 




* HburOtokilV 


* US WKl/Omha 


DIfIriMft Sytliv 
(MMDS): 








* klAiCanlk 








* Id South 








* Nyniii 








• FMfkId 


ms -\m 


im-im 


ms - CMTMt 


IW-. 



New technologies available chan- 
ged the concepts of interactive 
services. From analogue to digi- 
tal, from proprietary to open net- 
work standards. MMDS as the 
latest distribution technology 
raises two questions: What comes 
next? And: Which technology will 
finally provide the quality required 
for true interactivity? 



317 



Sources 

7.1. 2.2 ECC research (1997) 



ECC 




The number of trials is a measur- 
ing tool for the great uncertainty 
of the industry. Do consumers 
need or want interactive televi- 


7 . 1 . 2.3 United States and Canada: Second Generation 
Interactive TV-Triais 

Analogue to Digital: 1 990-1 995 




sion services, and if so: what 


tepnf 




Uhi$ 


Mm 




iMt/W 


IMi 




should they contain and how 






M 


iMlMill 


M-- 






WM 


should these services be dis- 
tributed? As demonstrated by the 




MiNdiK 

Ml 


i/i 


VnHimti 


FliftaAiiiilIM 




TIS 


ss^r/MiA 


number of trials that were quietly 
abandoned, sufficient answers 




ILIMnOltlJ 


VDO 


m 


[m*/» 


.- -.-i -X — 1 

UM 




were seldom to be found. 




NtAw^ nifhifl i^i 
Ml, OhAmi 


m 


m 


IWVi 








twtwflfrtw 

tawl 


Jmriilllt, 


en^fuMn 


WpiUTM^ 


MK(M»n 

MMBm 


imm 


l/e 


SSHpitUmhI 




{mfVm 


Ml 




m 




imVi 


*m 


1^1 




m 


ChIii,U 


>/■ 


Mvra.mM 

■Jriiwy 

I^HWiKXkl 


AnitMMd 

iMpii^Mdy 

VUhOM 


mu 


4JN 


lll/M 




m 


IMa* 




mMrnm 

OWMliinil^ 


WitMilw 


lfl4Vl 


IHM 


i/i 




liincPit 


CiMtM 

M 


HMiiA 


MM, 

Mom 


MMimMA* 

taMMiiA 

MwflfM 


itnvi 


\m S,0N 


sivMsm 

5Imf> 




m 






PIHPlItMl 


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TYMmiM 


imvi 

amim 




SMVMuSM 

HtUilHMl 

■1 




NnMyirtiM 


Mil^lY 


i/I 


fW 


Win Ml 


imvi 


51 


SIt/M 






MitMT 


Mu 


ffKmM 


F«if»*i«l. 


IffWi 


i,m 


WMMU 




IKTMtniM 


HpMPi 


$d/AM 


mfii, Tn 




VHK 


a» 


swMtmr 




towiNtW) 


IMrt 


IT MM 




Chi 


IlMMi 


\mm 


SZ/M 




(flRrtHlJ 


OmMT 


fbmm 


vm 


firtllilMi 


M'^Vi 


inm 


Stl/MSfSS 

hm 




WmCilb 


MKiqiU 


HIT 


MTO.m 

MM 


ftn/te 


mij 


iioi 


«/« 




bimUmm 

rn\0mm\ 


DM On 

iM 


WMW 


miM 

Ml,faMtll 

M 


M 


im 

iMMiim 


imaMHUi 
1f« 34,M 


IfHIIMvIt 

tifl 




Tfmn 


UM 

tDtowMO 


ttlUM 


MVOB, VQO 


FfaVM 


7/UVW 


M 


SiyUKtt 




Wttnlammt- 


iMbitiarii 

U 


(■■nM 




l/lMp><M^ 


iwWi 


UprElHi 




Sources: 

7. 1 .2.3 Cable World, Press Releases; ECC research 
(1997) 


(tlRMrrCml 


HttM 

Ma 


i/i 


m 


Cm 


l4/n4/M 


nm 


Wnii/TVIliH 



J18 



ECC 




7. 1.2.4 United States: Third Generation Interactive TV-Trials 

Fully Digital: 1995 -current 











iarnmA 






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uuv 


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im 

moMoi) 











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9/9 


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9/9 



to 


NMaiOi 


tmtikmmm 




(Ml/m 
(MAMkta 
A MdM 


•uVAMmi 




S4/W 


ll 




filWWC 


M.Mm 




IZ/HVi 


im 

M(IMmI 


9/9 


IMMmi 

CMWMI 


OMR 


WAM 


MMahM 


IMiiaiQ 




4M 


pawtiaSI S 


•SlM 

(M(M 


OMM 


WAMmW 


FWMm 




f/HVH 


im IM 


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il 


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fllldlMMlM 


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1 

J§ 


n/viVi 


I.M 


SHVmW 



With new, fully digital techno- 
logies, new interactive trials were 
started. The hope of finding better 
interactive solutions provided by 
digital technologies raised new 
expectations. But so far, results 
have been handled quietly. - New 
technologies, old failures? 



Sources 

7. 1 .2.4 Coble World, Press Releases; ECC research 
(1997) 



319 



ECC 




High speed Internet access, Pay 
per view and near video on de- 
mand are the most common tech- 
nologies, tested in several actual 
trials making use of Internet or 
MMDS distributional networks. 



Sources; 

7. 1 .2.5 Cable World, Press Releases; ECC research 
(1996) 



7.1.2.5 United States; Fourth Generation Interactive TV-Trials 
Starting 1996 

Internet or Microwave Multipoint Distribution System (MMDS) 







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MMOCpb 

MtoMk 

Maim 


1 

1 


h|kMMal 

anaarfM 

aran.yn 


oUiwrfM 


2/bMMi 


MMaakil 
ippm #»•! 

•IMbM 


SSIaSWa 

aMSINh 

SmbmrfM 


hm 


Na#a<( 




mwN 


MnOAdHt 

MMbiM 


lirnMni 


a'l 


Vi 


yMM 

Imli) 


iMbiUM 


a'i 


v« 


/M 


l/WVi 


IM 


bniaiadaii 

MM 


MM 


MiUM 

ir/MOHn 


■M 


h#MM 

anaa^M 


aHM 


MyfSAm 

(ayf^H 


aMOM 

IlMirCaM 


SWMia 

rnMaml 






CypilaM mmfmmd 

yv 



SMba 



USM 




M 


UMViMa AKCNKl 


OimMm 


I.M 


MSIflVaaM 


Rim 


OaMMdl 

aablibpalif 

imuaiffT) 


UMirCm 


hi^MMil AKl/IM 

anaalM 

nmn 


9/H^Mm 


Mbal 

iim 


SSVMia 

aMM 

aiaMm 

aaaSmiaaL 


MCM/Mm 


/MM 


IMI/MIb 


1 Mbanataai pMM 


7/RMm 


Vi 


S3IVaiy 



320 




ECC .• 




7.1.2.6 Interactive TV-Trials, 1994 - 1996 Worldwide 

Outside the U.S.; without commercial rollouts 





ImHH 


9 m 


um 


MMh 


IM 


ttai 


IbMlM* 


bMi 


OifOVV/MHI 


HO 


AOSl 


ini 


vm 




Mm. Irwd Mbril 


Anb 


HO 


AOSCRNIIMt 

MbM) 


VH 4 /H 


so 


M»IMm 


6MMr(l«kllMit AMMMAH 

SMiiniMiM 

M) 


HO.IHO.Omm 

ammmm 

m' 


m/m/m 


ini 


7, on 


Mm 


fiMMTlMMldtolil 

■V) 




H0,iyS»wAH^ 


TWCM.AM 


ini 


IMH 


WUMi 


MiyIbMidM) 


9/9 


HO.b^MMwt 

Smm & 


FWCm, 

AlUDCn 


im 


i,m 


NMiMm 


FMlNMi) 


Mpi 


HO 


AOSl 


■dins 


31 



•Or TV 



ffn 






Mi by IV 
CMpilvarf 



MM 



Vt 



hnd 

tdiiUmmmirnmi 

JipaifUhii) 

MnHwTb) 



(Mm) 

SM 

(MhMNA) 
■ ((AMM) 



■nOSV/BM) 



(O^t/M 

M( 0 S^V/M) 



mmi 



IM/Fbitol 

fbtiibMilii ins 
m 



ii/nim 

ini 



dMii(idMTV«>i 



Midi tnUlM 



(OSf/ 

%^i 



MvdibM 

ISI 



«^i 

9/9 




IhMiVnyM 

AM 



m/m 

Cm 

rbvcM 

FInAm 

AN/AM 



ini 

ins 

ins 

QVnW 7 

l/Hf/tS 

ins 

im 

ov^ 

ins 

ins 

7/VS 



ANIiS.MM 

kimi 

9/9 

l,M(S«MdD 



msii 

\jm 

m 

9/9 

m 

AH 

SH 

IHlifiiUHl 



«Ains;/M tSH 



(MdM H((MM 
MMOAb HUM) 



hi/Wm/ 



9/9 

9/9 



WlbiiMlMiv 

(MM), iHr HMi 

H(CM|ilNM 



HO. iMMbMdl 


fWlM 

L lad It mA HI) 


f/VA 


ISO 

(plaal: OOSI 


1 

f 








HO 


TWCm 


ii/nvH 




9/9 


9/9 


im 


i.m 




fkm/im. 

m/m 


ini 


<IH 



It is remarkable that national tele- 
coms started most interactive TV 
trials. But as TV relies on contents 
rather than distributional tech- 
nologies, the outcomes of many 
trials might be questionable. 



Sources 

7.1. 2.6 Cable World, Kabel+Satellit, Press Re- 
leases; ECC research (1996) 



321 



7.1. 2.7 Interactive TV-Trials in Germany 



ECC 




Most German interactive trials 
have ceased quietly. Several prob- 
lems, from distributional tech- 
nology and contents offered to 
the number of participants, stop- 
ped the trials, sometimes before 
they even started. 



Sources 

7.1. 2.7 University of Siegen, Sonderforschungs- 
bereich 240; Kabel+Satellit, Funkschou, 
ECC research (1996) 



CMipvr 


ImiMh 




%Mh|r 


Sw«l«f 


M 


Mm 


ftnM 


Omidto 

TMkm 


Itrili 


AkiM/SfL 


11- J.-*J f-*-— 

njWii m 

im 


Hnili||in|, Oly y» 


imim 

l/H 


It- 


SO 




lurli 

tkmrndt 


hbtMiJ 


nJWm m 

C««i 


m MOD. VOO, 
H—tiippiiH, Ply lirfa 
—ia^Tiiti Htdli Safki. 


m 


3|«tn 


100 




u L 


NtUi? 


T_ j_h_J 

IWSW 

t^/hm 


ffC SirvkiMii-DaMii 
Haiadlippli^ 1 i1iAbAii| 


mu 

ilakd 


lyw 


MOO 
101 My 
yatrtwi 




CiIdph/ 

Mm 


bbtUii 


HyMnbw 

Ci«t 


VOO, Sirnns w Owaii 
Hmdkfpinf 


01 ftntljftl 
{f/H)itaiy 


Mr— t 


100 








Fin It in 


Wthh-iii-DiiiibiA 


aftanim 


1 lyiBi 


too 




Stmiin 


Hwlili 


HyMFiif 

Cn,AlM 


TOO, fm y aami 
baifliappiqf Uiiiiy^ 
6an 


QIK 


I3r«nl 

liM/K 


4.100 




Muniifc 


liii TwAiit 
l*nl 


U- Ji.-rJ r*-- - 

fiyini rfliv 
Cm ATM 
(MiMbiL 
ADSl 


SaiktHaOMHii hAh 




3ywi 


MOO 


VihKM 

HiMiT-HtW} 


illillll 


OMiii!] 


HjfWFiin 
Cm, Am 


pftcm.Mityii«Miiii, 
11^ Spiy yiniii Hm 

Gantt 


01.17 


lyim 


iQ.en 


mmrnu 

AG 


mUMd 


n iL.ii nJ.-- 

nym ran 

Cm 0(0 


b»t4 yawtl tnta. Want- 
AawjnftTdbiaAhjyt^ 
Sarto 


QIHiaya 




1.000 


flGSw 


f - -J-- i 

jfinM 




md 

par/Cm 




IfHiatftl 

If/fOnvaJ 


libi 

AidM 


kb 

Md 


AMIStlAiiMd 

tim Iff ImI- 
dnlM Uftn) 


IhMi 


OdhvMtM 

Ann 


FWCmi. 

AOSl/Am 


HaMdbpim yawl 


m4/H 


}aaAi 


n 



322 



ECC 




7.1. 2.8 


Digital/Interactive Bouquets in North-America 




Direct Broadcasting Satellite, 




















cable or microwave are the cur- 
rent distributional systems of 
choice for digital television in 
North America. 




OpmUr 


SmiM 


ImmA 


VSt 


imimm 


< 

mmm 






wutm 


USA 




Dhitm 


>Ht4 


Dtsf/ns^i 


AfBsDrtB-an/ 

Uminai 


Ikmm, 

N—aiic, Sap|f 
Sopft 

Omi. IWin, 


171 


SAW 






USA 


mrni 


USSI 




DK^I/PK-} 


Ami Deta-aW 
Tliiian 


Mpi 


n 


Sllf 




USA 


Pjintflif %lMn 


hniilB 


Afr H 


yam n 


Wd 


G—d bijliM* 


•0 


S10/a«i) 












hHtMMnl 






mid 




Awiriti ¥mik 


Idmm 


m 


ivH 


Ed»Sl«l 




EcKtar/W|M 




Smiifidd 




ini 




Art— ifc 








Ml 




USA 




AMM- 


Jdft 


mTUmr 


Hrt^ 


Tm (■■■■ 


lOOf 


SifO 












4on 


IrtrtKhnt 


mOMSmini 








USA 


NtnCom/MQ 


ASM 




\mWyta 

SrMn 


NMilbirtrti 


Hkhm 


I0D + 


all MM 




USA 




i^nlrtivi 


n/i 


Wii 


Imiril 


C—rd 


100+ 


all MM 






[liiiiirtiullini Iw 


DTH-mn 




lm$k 


hBlrMMMT 


hiariiBinl? 
















miton 












rnkidk/wliimmm 




iwmtfikwi 




TQDI^ 


OhrH 


abb 


£«irtd 


G«wdhidMMf 


K 


S4DD^S450 






CmmuihbIhh hie 


TV 






bOvnrt 










USA 


Cwiil 


ipdfA 


ifi; 


lA 


Guml 

hwHTMiwnf 


Gtiird bObMit 


•0? 


sioas4M 




USA 


Cu ^nmuiiiAMS 




Iff7 


abb 


tartd 


SMrtdbffrwMrt 


•01 


SWSiSO 




Afloilfl 


MSw* 


Antriafl 


Iffi 




lobiinM 


SdirtMfAAMi 


100 + 


all MM 




CiMftktl 


SNFT 


AMrkM 


\W 


abb 


nUhm 


Mb<AnM 


100+ 


abMM 




fkMi 


m 


Artiricrti 


mi 


abb 


nkhM 


mUAhM 


100 + 


aliMM 




USA 


Antritodi 


AnwricMl 




fibiiKyid 


MbididM 


100 + 


abMM 




USA 




ii^n 


Iffi^ wiif— wi 


nwRiai 


TImiim 


m 


all MM 




USA 


MA^ 


Ub-TV 


IWfl7 


■WMI 


Hhhm 


Hmun 


m 


all MM 




USA 


NdlkUnii 


yi-n 


\mnj rt^rprtm 


Tlmn 


Th— 


m 


abMM 




USA 


fiMlItaiw 


N|M 


mj 


abb 


(SiMtfk AE 


ibiMd 


100* 


abMM 




Cmak 




Umdt 


ia/iHCiiiiii 


EjiptiiVli 


mj 


JUhEI/ 


iibiiKiM 


KbiiMM 


in 


abMM 






csc/wc 






yiSrt 












tmuk 




hm 


mn 


abiAiciM 


inn Ortitfiiii/ 


n—Bwi 


100 + 


abMM 






Imdadini 


OAicnv 






Bi—iin 










fmnli 


Shi* DIS Vviurit 


Am M 


mn 


mU4tM 




i»biMid 


100 + 


abMM 






Uww 


dlNdiiUi 


OkiH 


abb 


Gwid 




100 + 


SiOO^SlSO 






CaHwnuim 






InAiiiiiiil 










CmAi 




mr 


cdk 


GfMfdl 

IffitHHrt 


Ciwid brtniiiart 


•07 


S400-S450 


Sources; 




















7.1. 2.8 Screen Digest, August 1996, p. 177- 




















184; ECC research (1997) 



323 





■■ ECC .• 




Split into different categories, the 
preferences become clear: The 
(financially) most promising dis- 
tributional system appears to be 
video on demand, although the 
demand for VoD is not clear yet. 
The most attractive services are 
expected to be homeshopping 
and telebanking. 



Normally, it is hard to research the 
prefences of consumers regard- 
ing future applications. But home- 
shopping - already broadcasting 
on free TV channels and widely 
tested in interactive trials - is 
regarded as "most attractive" by 
only half of the respondents. A 
sufficient target group to make 
good business, but who will take 
care of much higher valued ser- 
vices like adult education and 
edutainment? 



Sources 

7.1. 2.9 MGMMedioGruppeMunchen(1996); 
ECC (1997) 

7.1 .2.10 Hewlett Packard; Screen Digest July 1 996 



7. 1.2.9 Interactive Trials: Ranking of Contents Offered 

As of 1 6 trials researched 



VMf — immi I7 




FMtwt Flm 






14 


Ntwt/Mt 




10 




KOTTHMMn 




f 




OnMaUi 




f 




Gom Sktwt 




• 




Sftrt 




1 




VMmCmmi 




7 




S«Ucftd Ms 




4 




TV MfeilMt 




$ 




(vmH 




S 




NWsk-Opf 


3 






hrttriclivt Art t 









7.1.2.10 Most Attractive Applications of Interactive Services 
the U.S., 1995 






jy/mimmd 


74% 




73% 




72% 


Ekdr.TV^ 


72% 


EAvfdvMd 


69% 


Him rtifiHii 


S2% 


liiHKsrf MWt 


52% 




50% 




43% 




42% 



324 



7 * 1 *3 Compression-Techtiiques 

7.1. 3.1 Timeframe of Compression Standards Evolution 



fcr / 




^ji 

IW 

\m 

Iff? 

Iffi 

IffS 

Iff 4 

Iff! 

\m 

itfi 

im 

If If 






W(C 4 



fa 4 linfaiirf mm il wry Iwr iili idhti [< >■ 44 Ibii/iJ 

fa vi^MCfifafiidAg md mkk 
ISO. \K 



OVIT 

mvm< 

iPfGlIWSJI 



bfmrnUm^vihmdmUmi 
ItitafTntkii brii 4 aniH| 
faifwilnM, b«td on MTIG 1 
fa brodming fta loidfa {>ij or 
fa If od tfawififaoi li (Mipvi^ 
[•■IrtMly fa HOTV (fanw H?B» 3| hdoM 



Mvtf fa hi|hpdl) Mi*^T««nian 



mi 



krndhfmM 

Stador^ fa fa OQwynriiB and OrHsmiBan aid iflfa iilDri|f «f oufa (D.? ifa/i} mi di i d o ll 



nfaco 

(Wdiiio 



IkfafaMn 



N m 



JfISIfM} 

IMnI Ffaipfait Enpni 
GfMpI 

HiMmm 






fa tipiU* if i wnd U nf fa fafatii «, fa nfacorfaiiidfa 

faC^lima)^lnKLl.SM4/i 
bid fa ISO. K( 
dtvifadfaiDfl 

fan CD ixiaHn if MfHi 1 fa Q^l nd faitCO fhi Mfon/Soiin) 

Mdfmfa oxlwdi of fa iffanrilnFt fa fafh Nsfadi 
Ifai m popfai « jnc Inh 
CKBpony iindiid fa ifaniiofl wd dbo 
liwd fa fab Cinprtin 

idfadb nlHfai of fa vf^murilwn fa Wfabwt, IlH-itiipafai Ks 
cadfaden of t n> pnr<t i n d rrdi ad Dfl-iliiaddd 
bnd faikniift Cpp. 

faff lnportKif tbdor^: H.2II, ffadird fa tyndbimii InnyiitiiM of odfasd lanriw 
Inud fa ITU-T 

Sd vidit, Ifad pnfm 

Stoofait fa fa onpoBM of hfh rti Grapba 

Difairi ficivt pdin pnfMo 

hndfamiHlSO 

fa pr rfouiord ndn pncmoig 

dm Pt tmprmd pkfao fa pldiro, faiorfat b fafatt an mi md fa fan-foddot 

OMpm fa mdfaifa vws if Kt 

Slndvd fa nmidon ad tomnifafai of nfafail dili 

ddfaml vinbffi fa rab-lim md fa oiYiicInmai kmiKHon K laid doe Irom CDfann 

fw lodud to np nu fa ffUt ITV) 

bvdfalidCori 



The recent history of data-reduc- 
tion standards demonstrates the 
increasing power of algorithms to 
transmit ever more complex 
images with ever less data. 



Sources 

7.1. 3.1 MGM MediaGruppe Munclien (1994); 
Booz Allen & Hamilton (1995); Reimers 
(1995) 



325 



ECC .• 




In the 1 980s data reduction stan- 
dards were perceived as a chance 
to increase the quality of broad- 
casting by transmitting one HDTV 
programme via a normal TV chan- 
nel. In the 1990s data reduction 
standards are planned to trans- 
mit several compressed pro- 
grammes over a single ordinary 
TV channel - but with a reduced 
picture quality. 



Transmitting a movie takes a lot 
of time: Only a high-speed net- 
work can transfer low quality pic- 
tures (comparable to VHS) in any 
acceptable time. Even compres- 
sed PAL picture quality would take 
too long for video on demand. 



A reduction quota of 1:469 for 
ISDN-data and 1:28 for moving 
TV images shows the power of 
reduction standards with even 
more powerful standards yet to 
come. 



Sources 

7.1. 3.2 Prognos (1995); Reimers (1995) 

7.1. 3.3 Riehm/Wingert(1996) 

7.1. 3.4 M6M MediaGruppe Munchen (1994); 
Prognos (1995); Reimers (1995) 

* Number of compressed channels to be 
broadcasted on a single ordinary TV- 
Channel of 8 Mhz 



7.1. 3.2 Standards of Broadcasting-Quality and Receivable 
Signal-Quality 

omUt Owl aniWw/twiiwM* an <»■ <n 











Nmm 

Wliilt. 

ImHVOm) 


UUMM) 


MiUt 

dnCM) 


lOTV 


iMOitailV 


VUmIpMIVHS) 


u 


lOIV 


lOTV 


LOTV 


S9TV 


SmMMUiiiTV 


ididTVSliMHitMl. NTSC) 


ipnio 


SOIV 


SOIV 


LOIV 


COTV 


brfHKld OlliMlNII IV 


Iratta /StudMaiMi (M 


4 


BTV 


SOIV 


LOIV 


HOTV 


Wl^OilMiMlV 


Mf^ltSrlV 


1 


HOTV 


SOIV 


LOIV 



7.1.3.3 Transferring One Hour of Film: Quality Levels and 
Necessary Time 



Hiflllhin 


rtfiintf 

ttanpIlMi 


Irwfiflt iin vrifk « fcnMMi 
«4kUt/t lom/i 140Mir/s 

nSM) lUN) (VM) 


PAL 9iKanfmi4d 


7%m 


im i 


1030 1^1 


40 nil 


mm2 - HDTV 




134 k 


340 Rin 


17 nil 


mmi • SOTV \pm 


1.M» 


43 k 


34 nil 


100 w 


mm2 tMipftffW ' lOTV (VNSi 


us 


13 k 


f nil 


39 m 


7.1. 3.4 Datacompression Ratios 






SI|adiMn« 




lififl af 4ifi 

mm/i 


laiaiaila 

JMH/t 




Avdta CD {Sima} 




1.4 


- 


- 


ISON 




30 


0,014 


HUT/H341 


CO-tOM 




30 


1 


umi 


TV«ilfMl LMWffiiiaA SOTV p 


vat 


iy 311 


3 4 




TV-tl^ tfanappraiiH EOTV-^aalTy^ 


pm 


iy 211 


19 


mi 1401 


HDTV 




143 \m 


34tl« 1431 





32 € 



ECC 




7.1.3. 5 Comparison of Digital Radio Systems 



Pit 



SMI 



WK7 FMlIi 






nifisdwisno) Miv 

ptrtiiii 



mmidwISW 

SMrilll till I Mini MMki 

MW 

WUpMMiMwfll (Mplllr 



i4 SMvrtifvka 

Hipi 

wm 

Ut 

il4 

ir«pi um 
mm 



im 

ins 



m 

im 



btaiki Mi- 



Different compression systems for 
digital radio broadcasting are 
competing for a future standard. 
Digital radio would make It pos- 
sible to transmit more stations 
over a single frequency. But it is 
still questionable whether the 
consumers as well as the radio 
stations are willing to pay for new 
equipment, as the audible advan- 
tages are little. 



7.2 Economics /Forecasts 



7.2.1 The Multimedia-Market of Forecasts 



hHlftifi 


Ifw d fft|nh 


Tim 


Timwr 


Tim 


Tiiflvir 


Tbt 


firtwih 


FrHt I SaivM 


Iw bpd- 1 uFhnrt in U.i 


ITTO 


lOkUSS 


20C0 


n.ohuss 


lOrMn 


i7 


Frpfni 


li Wntiri Empt 


IffI 


0.i^KU 


ms 


IS km 


4r«n 


(7 


IMitt VhiMi 


MHhbMAB-Mvfc it 

■11 ,J. 

■wnw 


IW 


3.0UUSS 


Iff! 


35.0 b VIS 




1 11 


Om 


pm 

bntiiiia-dbili ki Empt 


mi 


O.ZI 1 USS 


K»U 


3UbtfS$ 


ffim 


i1« 




Id toliwii ilwli ti 6inwy 


\m 


0.3b0M 


noo 


7 0bDM 


lifiin 


*33 


JUai Irtm 


UnFimd} 


1HS 


2SbUS$ 


l«f 


USbUSS 


5f«n 


iSO 


Uii Iriwfl 


liilwIfYii otfvifKsilif 
HMfidifitBlE 


1W5 


IS BUSS 


im 


ISbUSS 


5vi«t 


k40 


Ftimltr IvHwdi 


pmiwiktiUS 


ms 


37aVSS 


m 


llbUSS 


4rMn 


1 70 


Wirf SIhIhi 


iMil riitnpw 


ms 


IlfUUSS 


m 


79.1 buss 


6pni 


* S 






m 


300»USS 


m 


SbUSS 


Sym 


xl7 


Fwmitr Ittnrtl 


Oi4Motf>iriyi« 

rtvWMvMMt 


m 


Hrnm 


m 


157 buss 


S)rw 


s35 


Cyfcirfriarfr 


kMutciii liriMWnt 
nmmii bwpt 


IfH 


MirUSS 


3090 


171 buss 


SflMI 


1 7 




InlmcPii 

ifimiRiiiU.Su 


IW 


4I«USS 


3000 


4.91 bVSS 


Sym 


ill 



A whole range of high flying fore- 
casts are accompanying the 
expected multimedia/ interactive/ 
online "revolution". It will be 
interesting to check in the year 
2000 which forecasts were just 
highly overestimated hypes and 
which will be correct. - Maybe 
not too many. 



Sources 

7.1. 3.5 Riehm/Wingert(1996) 
7.2.1 ECC (1997) 



327 





ECC .• 




Within five years Cybertrends esti- 
mates that the revenues from 
interactive TV will grow from 0 to 
more than 1 billion dollars both 
in Europe and the U.S. 



7.2.2 Forecast: Potential Revenue from Interactive TV in 
Europe and in the U.S. 

In million US$ 







2000 


2005 


tiro^ 


|gik CATV 


35 


U3T 


s,m 


Inttroctivt TV rtvMtt 


0 


U3I 


0,544 


Traffic/ttWplHMy rivtiiM 


3 


315 


3,373 


OtHif (odviftiting/rttaAl 


0 


100 


SOO 


EUROPE TOTAL 


3S 


2JV 


18, ISO 


USA 


loik CATV rivtmtf 




IW 


4,727 


InttfiKthfi TV rtvtfflpt 


0 


hm 


10,090 


Tr9ffk/tdtpli«iiy mm99 


0 


m 


5,045 


Oth«r (tMfvtrtFtliig/rttBil) 


0 


zoo 


100 


USA TOTAL 




4,913 


22,AA2 



Are Europeans less prepared for 
interactive services of the future? 
In Germany, France and the UK 
only half of the VCR-households 
rent videos on a regular basis. Also, 
mailorder and ordering goods or 
services over the telephone are in 
most European countries far less 
usual than in the U.S.. 



Sources 

7.2.2 Cybertrends; Screen Digest July 1 996 

7.2.3 Inteco/TV World; Medio Perspektiven 
10/95 

* Percentage of Households that has rented 
one or more videos during the lost month 



7.2.3 Usage of VCRs, Telephone and Mailorder in the Household 

As % of households 





USA 


Ctmmf 


UR 


Frwci 


Italy 


VUtoRMtoloiVCR-HMMlioMt’ 12 


35 


34 


30 


45 


HobibAoMs ¥irH1i i VCR 


88 


43 


74 


40 


57 


RtfUv Biifi tW IflifUM fwr.^ 


OrAtrliig Pfxzo/Fo«4 


45 


21 


14 


1 


11 




25 


2 


3 


1 


19 


OrAtHag Tkktts 


23 


12 


15 


1 


9 


liilonMtIoii strvkts 


17 


13 


2 


12 


14 


Lottffits/lfttiiig 


21 


1 


24 


23 


1 


MrilirAf $9^ 


CIoHms, SAotf 


39 


29 


23 


10 


37 


HoBstAold Iteaif, FBmHvrt 


23 


8 


12 


4 


7 


CostfHft, CDs 


39 


10 


11 


7 


20 


Gifts, Food, Otktfs 


29 


12 


2 


4 


10 



328 






ECC / 




7.2.4 Market Volumes for Interactive Services, 1992 

Selected fields in the U.S. and the UK, expenditures per year in US$ (estimates) 





USft 

Totd p«rTV‘ 

ivMISS bwilnM 


U 

Tfftd 

iiMS$ 


K 

pifTV- 

ImmImU 


Yl^rwitol 


12 


m 


2 


93 


VUtogomti (HorihC Softwort) 


5 


54 


1 


46 


{^hrott ft bisfMf t) 


ISO 


U2S 


35 


1,620 


Oiilliirstrvk« 
(prfvfftt ft bfiNttfs) 


35 


310 


7 


324 


Mail orJor biflntii«s 


70 


7^ 


6 


278 


Totoi 


277 


2,952 


51 


2,W1 



From mailorder to homeshopping, 
from video rentals to video on 
demand? - Existing business sec- 
tors that could turn into potential 
interactive services accounted for 
more than US$ 2,300 per TV 
household and year both in the 
UK and the U.S.. But whether 
people are willing to change their 
habits and buy from interactive 
services is not quite sure yet. 



7.2.5 Forecast: Interactive TV-Households in Europe 

Figures in thousands 





1994 


199$ 


19H 


1997 


1991 


1999 


2000 




0 


9 


73 


49 


95 


165 


266 


DmmH( 


0 


17 


26 


38 


54 


74 


100 


Frwcf 


0 


16 


41 


89 


172 


303 


492 


Gtmiaay 


0 


93 


206 


407 


729 


1,205 


1,856 


Grtfct 


0 


0 


0 


5 


11 


20 


35 


ktlMid 


0 


4 


7 


13 


20 


30 


43 


lldy 


0 


0 


1 


7 


24 


69 


165 


NfHitrtoiidf 


0 


16 


39 


84 


174 


322 


543 


Portvgol 


0 


0 


0 


1 


5 


13 


32 




13 


36 


84 


174 


322 


543 


844 


UK 


60 


107 


177 


274 


404 


566 


760 


Rfst if Eiroft 


0 


16 


34 


65 


116 


193 


303 


Ibtol 


73 


314 


639 


1,207 


2,115 


3,468 


5,353 



The number of households re- 
ceiving interactive TV services 
could rise significantly: From 
1997 to the year 2000 the 
number of ITV-households, ac- 
cording to the forecast, could 
grow by more than 400 percent. 
That is provided that the tech- 
nologies, the contents and con- 
sumer acceptance are there. 



Sources 

7.2.4 Huntink/Leyten (1994); Riehm/ Wingert 
(1996) 

7.2.5 Ovum/Screen Multimedia 2/95 



329 




•• ECC .• 




Multimedia based learning and 
education (CBT) as well as edu- 
tainment could become big reve- 
nue sources, especially for con- 
tent providers: The market size in 
Europe alone is estimated to rise 
to US$ 2.5 billion within the next 
ten years. 



7.2.6 Forecast: Spending on Edutainment and Multimedia 
Education 

In million US$ 




Swe^n 

i S 

Ifory ^29 
2 




0 



Sources 

7.2.6 Dalamonitor, Screen Digest June 1996 



330 



ECC / 




8.1 History /General Overview 



8.1.1 Classification of On-line Services 

Ififofmcitioii Sites/Public Relations 

* most private homepages end companies presenting themselves on the Web 

Information Sites -k added serYkei/information 

* SMW with c detailed display of certain products 

New Producti/Services specified for Internet 

* My World (Karstodl), Doily Focus 

fm Intwiet Sinrkt Providv 

* Netscape 




No one knows quite what the 
term on-line services stands for. 
Here is a classification of the 
different services offered on the 
Web, that could all be subsumed 
under the term on-line services. 



8.1.2 Distribution of New Subscribers Added, 1994 




The rise of the Internet in the USA: 
While the Internet accounts for 
more than 40 percent of new sub- 
scribers in America, Europe reach- 
es not even half of these growth 
figures. 



Sources 

8.1.1 ECC (1997) 

8.1.2 ITU (1995) 



331 



ECC .* 




Small steps of technology, but big 
steps for society? - The software 
and hardware developed over the 
last 25 years has allowed the Inter- 
net to grow from an academic net- 
work to a worldwide medium. 



8.1.3 Internet History - Developments of Concepts, Technology 
and Software 





Tw 


CMcipft/ltfhMn 




•trlv 

50$ 


Rnl (oncipfs of symbwftt ftbfloiB btfwrcn )ra<litits ond hurFnn bfin^[ fini 
mhiorkfto^, «.g. S80E. fin ofidd spm 




63 


Podttt swHdtnf; (fiocipr lo froctiiri a mtsstgi inlo Uocki, oti vsing dHfirtnl 
paths to Ihilr dtstinifitn hf using dbtrihutid nthvorlts. y«t ly Pout loron of 
Ihi UNO CorporoHon 


Ritt lyitMi imM 

MMM Hid wriwkwf 
lnff»4pc»^ by Dw^i fapiirt 
tl Kifti PARC 


69 






69 


ARPAmt lorn. A Dtpoftminl of Oif imt Prated in ifit IIS, it mn designed to be 
midoar wor proof. The net nduded 4 tiodts. 




70 


HCF intTodyetd os on improved vtnion of TEUief whkh mode it urntdef to 
corrad fo o rimole lompufiir. NCP moblts hodtc^lNni romfmirMafjon. 


nPOvniM NHPt ifltwvt Hw^ 
Mktf tl pHitUt ft tilrt 11 
MTt Mwi Ml ItraiMt fm httf. 


71 






72 


SNOIASG ond CPYNET: Tbt Rnf f'rrai progrommo 


f i^-_— — 

CivIVriPvl VI w pVPIf^Mi 

i« III CTwpttin ItitlAtr - 
• firit ftililyp «f Ult 


73 


FTP introdiKed. Rle tronsfar protorol stondordisid ihi Iromfer protorol for doto. 
lo6 Kofn ortd VinI Cirf (rioted ihi idea of on lorty 1 nfernel design: o mNiorfa of 
rattorks bnAtd logefhir by gotnoys, routing (omputirs slofidhg bttwwn itit 
vfirifiuj nttworks lo bond off nittsoQis frorn ont systeni Niio the o4hif. 




74 


TCP fTronunisuon Cortrd Ptotocdl designed os rovhad union of ifw TELnit ond 
morhed die Ifut beginnings of mtemelworitng. 




75 


CommisuMi becomes responubli for APtAiwI 




76 






77 


ftnl TCP for UNIX 


hrtti kitrtJvcfd 1046 


76 






79 


UsiriO New A projed 0fidtd Id Oili UnYiriHv, soon m 
ond in ihi nunior of newsgroups 




80 


MIUmI criolid «s i pure mitorY mhiork 


Mf4M»*SpM4: 3<KI hf 1 
TW Hiyn SawtlliJiB 300 
w« lntnAm4. f tr Mtit vitri 
H wfi fnt milk 


81 


eSNr fouriy « 0 nttwod for Coinputir Sdim 




82 




WiAM SpiiA; 1 200 hpt. 

CAIN ctwwclid CariftM 
ItMirch ClMBiMltltf 


63 


T(P/1P f Internet Ptolocol) istflUhhed hi ARPArel 

Fido aeotid; the Fird Mnol ond miAox fpm wfech imkes H possibli lo 

nchongi not oidy progrommis but oho new MCWoi bunched 



332 



•• ECC .• 




Afp^ NUdiHMli btrtAK*^ 



NSf Ntt oMtfi TW US- 
NcHwmI SdMct FmmMm s 
S6K StdAtw Ittft^ Miy twt 
fMrs ktftrt 



mUmSfUi 9600^1 



NSf btdAm ii Hm U.S. ifH 
l•T1(1.SM^f) 



NSf UdAtat hi Hw U.S. w^fti 
ttraHs M^f). nrstuhiM 
hf uto t 



MtdMhSfMd: 14400 kff 
NUrt Hmi 10 Irilki hytts 
tv«r Hm NSfNff-liAhiat 
ptf HmHl 

lUitm SftW: 2MOOkft 
hrtfl P 4 Iitr«4ict4 



MkKk4iMhiHMU.S.ir 

|rWt4ftOC-3(mMhft)«4 

i^fraMifdil«623Mbff 



IPiC * lattnMf Prtftctl Mit 

GfMrwtiM 



Tmt C«Mi^/Stffmf 

14 DNS (Domoin Howt Systwi) islihluhid. Hdps 1o ofgMiM ifw systtwi btfNr. 

85 

86 



88 (£IT (CompuNr EfmrgMKy Itsponst liam) (onslitulid «s riodion lo 4 n *«orm 
KddtnT (ousid by I. Ikrrh. 

89 Rnt (onntdion b t hmn (omrmrdol §hmI sy^ by MC «id 4n biNrntf 



90 Afdit, 4 m first Inttmtl stordi moiiM riliosid. Hilys to find infomiQlion 
rtfirring to ■ substring or kfyword. AlPAnot (MSid to txisl. 

91 Gophor introducod. h b dosignod to hoip sludonts find in formotion guickly, but 
soon supplontod by tlM Wib 

92 WorUWMiWibborn.DtYolQpodbylU 

rm Lm 8omirs. First onbm rodto broodcost ovor 4 m Not in M«ch (MIONE 
oudn muhkast) ond first vidoo broodcost (MIONE vidoo mubkost) in Novombor 



93 Mosaic introducid. Dovolopod by Mowis Univorsity studint More Androoson, o 
graphic usorintorfoci oosid 4m usogi of 4m btoriMt 

94 Nolscopt Novigotor dibuts, os on iidHncid conomrciol vorsion of Mosok. 
intorntt's 2Sth onnivorsory. 



95 Microsoft Explorir dibuts 

JAVA introducod, on objoct oriontotod progronont longuogi dosignod by Sun 
MkrosystoMs; it hofps to ploy moms and musk on o Wob sito; o now gonorotion 
of browsors is pfoMiid 



2000 MogoNot 



Sources 



8.1.3 Internet World, October 1 996; Hofner/Lyon 
(1996); Lundquist/Lynch (1996); Glaser 
(1996); ECC research (1997) 



333 



€CC 




8,2 Technology /Software 



Although the growth rate of 
shipped PC is expected to decline, 
more and more PCs users are 
going to get on-line via e-mail or 
Internet. 



8.2.1 Development of PCs, Modems and Internet Usage 
Worldwide, 1984 - 2000 

In millions; figures from 1 996 - 2000 are estimates 



Ymt 


14 


IS 


u 


S7 


ss 


19 


90 


91 


92 


93 


94 


91 


9i 


97 


9B 


99 


GO 


WaiMwIdt 


K IMl 




» 


111 


12 


14 


11 


If 


25 


34 


43 


51 


10 


If 


77 


15 


f4 


102 


Tmt T«r prtwtli In % 


* 


2 


12 


17 


17 


14 


If 


31 


3i 


25 


70 


II 


14 


11 


11 


ID 


f 


Kiknt* 


23 


2t 


3S 


40 


45 


52 


li 


71 


N 


121 


153 


in 


m 


2SI 


310 


374 


351 


% wM 2 


2 


2 


} 


S 


i 


7 


t 


10 


15 


70 


22 


23 


25 


21 


30 


33 


37 


MmiUr •! K nm 


23 


17 


U 


31 


43 


Af 


SI 


17 


n 


fi 


Ml 


144 


117 


114 


203 


217 


225 


Imt ft Tw ptwtk b % 


- 


12 


li 


11 


It 


14 


li 


If 


10 


21 


23 


21 


15 


n 


10 


7 


4 


UnUr tf t-tnf rstfi*'* 


1 


1 


2 


3 


4 


5 


i 


1 


17 


II 


25 


35 


10 


10 


130 


IID 


201 


% tf Pfj viftl mil otiHi 


A 


A 


1 


1 


f 


10 


1) 


17 


15 


If 


21 


24 


3i 


43 


14 


13 


If 


Mwiibtr tl Mtfitf/ Wtb ntft 


<\ 


<1 


<1 


<1 




<1 


<1 


<1 


1 


1 


3 


f 


23 


41 


11 


122 


151 


% of Ki will hriorwl octtu 


1 


1 


1 


1 


\ 


1 


1 


1 


1 


1 


3 


7 


14 


25 


« 


51 


n 


Nwiibtr of Wo4 mm**** 


- 


- 


- 


* 


- 


- 


- 




0.00 


0.00 


002 


010 


i.U 


UO 


in 


3J0 


400 



K «ii1 iMf inTi 


4 


Tiit If Tiv frnvil In % 


- 


siipcspfWK^infbi m 


70 


Ki It f *#“ 


14 


SwIillPO" 


5 


UnnAtf pf K tffti 


IS 


TiOf t« Itm nurll in % 


INwIif »f Im KiHt/ Wib iHrt 


<1 


% tf Ki wtrti hrtiftit ptrtii 




Htati witk Kl tal nwlHif « 



Tmt U fTiWlI in S 



USA 



1 


1 


7 


7 


7 


1 


10 


13 


4 


3 


1 


4 


0 


12 


23 


37 


4S 


40 


5S 


SO 


44 


4} 


31 


3f 


11 


21 


12 


13 


23 


25 


21 


14 


1 


7 


I 


10 


IS 


20 


22 


23 


17 


20 


10 


10 


If 


20 


22 


21 


12 


14 


5 


0 


5 


3 


It 


27 


<1 


<1 


<1 


<1 


<1 


<} 


<t 


* 




- 


- 




” 






2 



14 


20 


21 


25 


21 


31 


33 


31 


24 


21 


15 


M 


n 


IQ 


1 


f 


31 


3f 


31 


37 


17 


34 


3S 


35 


44 


Sf 


71 


12 


14 


105 


11} 


117 


25 


21 


30 


33 


37 


41 


41 


59 


35 


43 


50 


55 


5f 


41 


40 


U 


24 


n 


17 


10 


t 


3 


'2 


1 


1 


2 


4 


14 


25 


41 


51 


47 


2 


5 


tl 


25 


43 


17 


fl 


m 


4 


4 


to 


20 


25 


30 


32 


35 




SO 


47 


IDO 


25 


20 


7 


f 



Sources 

8.2.1 Lycos; Web Crawler; Morgan Stanley (1 996): 
The Internet Report 

* Assumes that PCs have an average lifetime 
of four years; 

** Estimated Number of PC users that use 
second PCs at home or office or os portables; 

*** Estimates of all em^ail accounts. It is also 
estimated that 50 % of the e^ail users in 
1995 could be connected to the Internet; 

**** Estimates of Morgan Stanley; 

# Figure appears questionable 



334 



ECC 




8.2.2 The Development of PC-Users and PC Sales Worldwide, 
1984 - 2000 

In millions; figures from 1 996 - 2000 are estimates 




U IS «6 V U 19 90 91 n 94 95 H 97 91 99 2000 



The markets are going to be 
saturated. The golden age of PC 
sales was between 1 986 and 1 989. 
Since 1993, growth in PC sales 
and probably since 1996 
growth of PCs in use has been 
slowly coming down. Will these 
figures determine the limits of 
growth of the on-line society? 



8.2.3 The Development of Internet and E-Mail Use Worldwide, 
1984 - 2000 

In millions; figures from 1 996 - 2000 are estimates 




More and more PCusers are going 
to be on-line. It is estimated that 
by the year 2000 about 70 percent 
of the PCs worldwide will have 
Internet access at their disposal 
and 90 percent will have e-mail 
access. 



Sources 

8.2.2 Lycos; Web Crawler; Morgan Stanley 
(1996): The Internet Report 

8.2.3 Lycos; Web Crawler; Morgon Stanley 
(1996): The Internet Report 



335 



ECC 




The limits of interactive television: 
Only cable offers enough band- 
width to transmit a larger amount 
of data in any reasonable time. Split 
into smaller data-slices, video on 
demand could become feasible as 
a service. Today's Internet users in 
Europe only dream of a cable TV 
connection for Internet usage. 



Netscape lost 30 percent market 
share within six months: Microsoft's 
heavy involvement pays off; the 
Internet Explorer is gaining more 
and more market share in the 
Internet world, coming along with 
Windows 95 for free. 



Sources 

8.2.4 Internet World October 1 996; Screen Digest 
April 1996 

ISDN; Integrated Services Digital Network. A 
digital communication service for voice and 
data transmission that runs over regular tele- 
phone lines, typically at speeds up to 
kbps. 

ADSL: Asymetric Digital Subscriber Line. The 
technology, originally developed by the 
Bellcore Labs, Morristown, N.J. for the inter- 
active TV market, can provide telephone, 
video-on-demand, networking and fax, all 
on conventional twisted copper wiring. ADSL 
could theoretically provide all services simul- 
taneously due to signal processing with 
digital filters, that make up for bandwidth. 
Currently (1 0/96) tested for Internet usage 
in Virginia by Bell Atlantic, by GTE in Irving, 
Texas and by US West in Boulder, Colorado. 

8.2.5 Interse; Focus (1996) 



8.2.4 Connection Competitors on the Internet 







HaAmtCMi 


imd 


Utt 


fm 


IhtolMiMlM TiMt Ift^ 
lltopi* fffiplM lfc«« Imv 

mm, mm, 
tm f«M nm uoi 


tMm 






Vftallf SO ii tit UtifiilMi, 
VS It nomit iwi|WHnt, 

bmfmtikam leyltiiltp 
rttn Mitts* 




nm 


11.5 min 


Uk 


liityi 


IIM 


St inm/t 


Slffl»S70» 


VinM%S0tatii 
VStoMmil 
Eiiitptiii mIihmi 

tm 


Fistf , P|Mt tw Mvi itfMrivt 

H iifi4v 

fkmhm, 

mmdk lniiil iHppvi ly 

prios, iitap Irtmitl Swki 

miv FVnttin 


njm 


t.litoi 


11 J til 


11.4 h 


AJ^l 


mm 

tifM 

k\4m 


$ 1,000 
S300 SOO 
IpreiKlid] 


ItflU SIDO pH Ivy Foil, niH 
■•Mh priftM m ftfiiv 
tUS fvHBil) itwiiliiH 


FiffoninKt 

i«n r 
bt Mvidbli far 1 
to} ywn 


1.3 tot 


10.7 tot 


4toc 


41 Min 


CiUi 


scnih^i ID 


SlXMiSSOO 


S3ShS«)pv 

(bnttti 

Cn^vi tviti») 


Vvylidaid 


Vhp'lbi 

ZyiMMtty 
riftot piMN in 

ffetVilf 


O.StoC 


fOtot 


lltoC 


11 Min 


MS- 

NrKt 

hmi- 

cifMq 




mkjHmn 


wluHiii, 

ktpvdM 


Vvyfail 


iiiitstoHiils 

itoCfBMy.net 

bfhnim 


iVi 


iVt 


n/9 


n/t 



8.2.5 Internet Browsers - Percentage of Users Worldwide 




336 



fCC .• 



8.3 Users /Usage 




8.3.1 Users/General 

8.3.1. 1 Computers per Capita, 1994 



USA 



Norway 

Finland 
Denmark 
Sweden 
United Kingdom 
Helhtrlandi 
Swllierland 
Ireland 
Germany 
Fron<e 
Belgium /Lnxbg. 
Japan 
Austria 
Spoin 
Holy 
Poiivgal 
Hungary 
Citch Republic 
Greece 
Poland 



■ d .22 

0.203 




0.319 



Technological lead: Statistically, 
every third American had a com- 
puter in 1 994. Europeans were far 
behind these figures. 



8.3. 1.2 Estimated World-Wide Number of Users of New Media 

In millions 



“ nf 


Iffi 


im 


Ki 


144 


167 


E'Mdt 


3S 


60 


htirvet/Web 


f 


23 


MM/ltybrid 


1 


13 



IW 


1f9l 


im 


im 


114 


203 


m 


22S 


10 


130 


IN 


300 


U 


t1 


122 


152 



73 



30 



337 



Sources 

8.3.1. 1 Morgan Stanley (1996) 

8. 3. 1.2 Morgan Stanley (1996), p. 3-1 



ECC 




Current users of the Internet in 
Europe could be divided into four 
target groups, differentiated by 
their rational or emotional and 
active or passive approach to 
Internet services. The European 
Commission has tried to describe 
their characteristics, thus enabling 
providers to cast their services. 



8.3. 1.3 Characteristics of Four User Groups 



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htnif mtmdm 



DMaitl^ LuoivtJS^SSrMriUl 
B«dlri^b«d «kaAa»» »ywdi i tc i M dhfidiniwK/ 
ydiadtail 

la^rdaMM pMMi) 



fMpli niq Mil ii *dr 
ipvt iM mm^ (« Mlv 
IdMNil («d l« k«it 
IdinMiM) mtMs ii • 

fra^d-kvini IvMl ad 

iirpl ‘ ‘ ‘ 



IS-NaftM 

fatam ii Um 4 M bf 

Emlil Rfvf taynliili 
bvd luadm hi MriMi 
hidMM^ bvym ad 
|d|n, Udwv adkd 
ii^apMpaiia 
h^^y y ihipdic 



NOaea^ 

l»IS0af 



Rfatkadaitfa 
«Mapiai iai dant 10 % d 
Oa pipddlai aw 14 yMn 
aa'ldartSMlun' (af. 
dia aai aa aaabadi alLi 
dOi vai^^aa Oaaaas d 
MilytfMlIIO^ISO 



*ldnra Sadan”, acadu la 
iair carrail aaani d TV 

MhS 7 ( 4 ar). 

(m lyaial arafaaiaM 
IVf 



Naavy TV mm (>3 laan ^ 
Oar). y^iwjj/caaA 



iMBiaparaatlpraMt haaaaanaoailaa^l 
apiaahraaaliidanMlai h aOawa euft, hd aa 



•wranii nadir pad adaiaid adaam attai a par a lat tf pra^ 

paOai, ndi ai aaiianir a damlwa* l#irpn» apinir m* lda«^ 

rnmK^mk’ mmrnnmmi aaadbadhaiiM^ 
Mhaato haaaOMa| t iapai J a 



aidira^a 
I aapadkan la EF 
p r da rti hdaT^dan nc): 
anda baiiiai are Idad a 

S^na 



IZb/Oar 



afa nardi k aa aaard part 
dOajah acaMM 
aan reparl Ad day are » 
In nare Aaa an na pa 
Oay IWanaffapii^ 
fraadakaflhB^hiataadi 
adatannaiaiihiifrd 
^ d Aa )ik Aaa kd|d la 
EPaihKranatfarAn 
aAiMaanfanadia 



varianpraapi, a.a.: 
FrefcaanAnikat An 
adaM* ad Sudan) 

KEaAnanaaOa 
■hnaaTVadafAnla 
FC/ain An Savayi Aaa 
Aal aaln nan a anad <al 
laAnadAinT^A 
bA ad laaai na are 
fri^aal FC inn. 
prelana^Andan 
laaiOalnanAa 
45aria/4ay 



30an/0ay 



rsk/hf 



tnaiHlaai w 
aAioAaia*d 



ia«a by AlaMaa AAi An la 

naaaiklnaiiAtcriiid 

knalaAidadaAa 



. TVaaldAaAn 
AEanwlalaan))OnliL 
(Saa^^ladfliaAL 
|lA,Sa| 

IvTsOadpapAare 

laanr TV a dAan (> 3 k/^} 

ilZlSitTmiT 

reailai alA 9 anfi, Id ai Milallaalana 
aal hwana Aak laid An A Aa bl yaan - 



antlaAnndaa 

iraaApalaaga 



awndAalTV 
adAhnlahiai 
AM da TV 



331 



•• ECC .* 





KW *ifid 



(MiMiiii lidirdwMii 
yyprrfh i iwi nm irf 
Mi CMHWCy IMM, mm 
MIITKlMf ttiMiO 



timid y#- mI ilwtiiird ii h n l iM 



K 



■dywia m fa riffad b i - pm y w t iirvkii pad tir 
bniwii nnuir iMhI ttd af lUKld h bi dwtniiH 

1 -f - . -i. '.r.r-:- ^ „ , . t _ J ■ 

Ma^noivt ■fiavwH| n nit ■ faM araii a 
enipid e Maiiiiiii taM il a rtgii^ e ^^ 

wlaliiMd*, bvi Mil bi 



Diwifi ' aatri idb dia 
pidit aid faaiDdif 
yatifani lajit |IM| 

f -fc--£—k- J 

UMVpMlu 

dhwffaap Knpiaici 

KLy«f 



laimStibn 

db«f 'too aim idi' odnr- 
ItiMf fa aapM a fa Mips 
prkalM(i4lV] IViMrt 
nm difiilopil idw f i Mi a 
andil itili|in: S0% a 
(ainwdd TV vimn npori 
dal tiip np n aatia pi- 
^riim daii| caaMnd 

adnnUii ami li aMr- 
lMfai| t,| fadidt paH 



oaipfaaitrJa^^ 

CT atfk# Kwn m idi 

III 

pwdast Kl 

foipap 



ndliaivaliiiii|lfaMlV 
Cmjimui: • flfiaiMiian 
ipnf -faana 



HKGm^CMMla 



Mamlidi - fai diptihai tadafat 



( iMiaMiWttam - faiaid ad lapaid 

pmivai|iaMmnit f' ^aim ataiimi wata - 
Hwtlpivdllli ftUt 



VE, 

dba fa fcdn pafacpatti 



CfMMudiir (mmmcrnm lahmi di K Eidad 
Hal iMi/ prdiniaMl laiawdri afc at 
Prdaaaii rmadar^} aditiadlM apapardd- 
mm. alifla a rdpfifai- la k paifa m 
adad dfatdip ftia diii ai nanpafi 
Ef Mpkadi a ba aatfv cut 
ad peitd Ml itia 



S«rdu 



apikiAad 



'Iff dal 



(tiSi) dA aapnfaianw 
fadnfi ad ana a la 



liddv Mbit uwri: iid i 

^ 1-1 J- 1-- 

adaaipAM,La.aabli 

trada Mpkaam; ia Ihfa 
paFMr caiW ivdbbAlY fa 
■at^M p ^ ^ 

ladw Mllh dablap^ a vdat 
Dodamdnf ads {ad Nk 
ad Mpicdai sbadpl 

paadA - MaiialaM ardtat dA m 
hlpladd afimd taa-wl faaaffa 
ManriMp raafaaa niA 

{PaandbdHUdAiaAj 



jdaaoiai a « HMf- 

ISSfaSdUat a ft 

flfii|ia,iaaaaliifad)iv 

ady^^ 

add Maafai adi idaat^ 
frwdi, plat ilL, iLi; - Oa- 
faa *«'; dha^ni - da-Hl 
final - "Sdflt-Claaafa 



hinhaai baaffai (dA 
nalaabla pafipiiH aibl 
rdadKHad 
rMamtad 



bdiaadM) ham ifaappfaH| 



Caapda bullnAMi KUI 



Sources 

8.3.1. 3 European Commission: Electronic 
Publishing (1 996); shortened by ECC 
(1997) 



339 



ECC .• 




Sports and general information 
seem to be among the most wan- 
ted topics on the Internet. 



Sources 

8.3.1.4 PC METER, Broadcasting & Cable, 
September 16 1996 



8.3.1. 4 WWW Individual Usage in the U.S. 

News/I nformation/Enterta in merit (as a share of 47.2 percent of the overall 
reach), June 1 996 





RMdi* 

(MrtW) 


Um|( 

fmym 


rtfitffi 


VWwIii^ 

P«fH> 

rtfNft 


Utmk 


RRmIm 

P«Pn» 

rtfMtf 


WiMfi 

% 


•f tNft 
ptffM 


CNET.COM 


6.6 


2.12 


5.03 


2.66 


39 33 


1.74 


876 


18.60 


IONn.COM 


65 


163 


3.72 


2.67 


50.52 


2.25 


835 


13.62 


PATHEtNOER.COM 


58 


1.46 


3.W 


2.53 


4935 


2.01 


839 


12.11 


DtSNEY.COM 


4.7 


1.43 


6.72 


2.39 


35.75 


142 


955 


13.66 


SPORTSZONE.COM 


3.7 


2.38 


9.80 


2.14 


42.75 


152 


1494 


35.52 


iNmuasT.coM 


34 


263 


3.44 


2.02 


36 65 


124 


426 


11.19 


USATODAY.COM 


33 


2.86 


5.30 


1.92 


40 57 


1.30 


689 


19.71 


WUTNIR.COM 


3.1 


l.fl 


459 


185 


27 30 


0.84 


386 


7.37 


MACROMEDIA.COM 


2.7 


1.25 


318 


228 


33.70 


1.28 


407 


5.10 


NANOO.COM 


24 


1.31 


244 


202 


30.27 


1.02 


248 


3.24 


aiN.COM 


2.2 


2.58 


3.30 


2.02 


5708 


1.92 


635 


16.41 


UNinDMfOIA.COM 


2.0 


2.50 


234 


2.59 


31.15 


1.34 


3.14 


7.84 


STRIP-TUSLCOM 


20 


123 


859 


224 


38 33 


1.43 


12.28 


15.09 


PCMAG.COM 


1.8 


127 


3.20 


193 


4190 


1.35 


4.31 


5.49 


NIC.COM 


1.8 


130 


3.50 


1.82 


42.03 


1.27 


4.45 


5.80 


HOTWIREO.COM 


1.7 


1.10 


3.13 


1.92 


45.57 


146 


457 


5.01 


IMDI.COM 


1.7 


1.43 


8.47 


228 


18.75 


0.71 


6.04 


863 


HAfPYPUfPY.COM 


1.7 


1.5» 


2.57 


263 


47 36 


2.07 


5.33 


845 


OISCOVERY.COM 


1.6 


1.46 


3.63 


2.11 


47 90 


1.68 


6.11 


893 


HOMEARTS.COM 


1.6 


1.18 


448 


1.70 


4416 


125 


6.07 


719 



One point in the rating represents an 
estimated number of 120,000 - 
150,000 users 



340 



ECC 




8.3.1. 5 Average Time Needed Learning to Navigate the Internet 

% of respondents in the UK 




It's not as easy as it should be: 
More than half of the Internet 
users in the UK said they had 
spent between one week and one 
month learning to navigate the 
Web. 



8.3. 1.6 Time Budgets: Will On-line Surfing Eat Up TV Time? 

In minutes per day 



ISOi 



TV (Troditional Broodcosting) 



130 ml 



Will Webvertising gain a share of 
TV advertising budgets? - It was 
found that people who use on-line 
services reduce their TV viewing 
time, not their reading time. 36% 
of the WWW users confirmed that 
they surfed the Web instead of 
watching TV on a daily basis. 



Onlmtiind. I TV) 



3 mb. 



1996 



2000 



2005 



Sources 

8.3.1. 5 Durlacher Multimedia Intervid, Screen 
Digest 1996 

8.3. 1.6 European Commission: Electronic 
Publishing (1996) 



341 



ECC 




Only 3.7 percent of all households 
in Germany have on-line access, 
but more importantly about 
70 percent of all households do 
not even have a PC. 



^.3,^ Usoge Germ 

We have tried to collect all available data regarding Internet usage in Europe and chose 
Germany as an example of how the Internet is used and perceived. 

8.3.2.1 Technical infrastructure: PCs and Modems in Germany 

As % of all households; n = 1 0,1 46 screening interviews 



User of 
Onlioe-Sifvkes 




PC and Modem, 
but no 
Online -Servkes 



f is 



H Gtrmony 
Former Eosl 
"f : Former W«i 




The Internet is predominantly 
male, especially in Germany. With 
only 7 percent female Internet 
users, the Internet appears to 
remain heavily biased. 



Sources 

8.3.2.1 MC Online-Monitor 1 /96, Media-Oaten & 
Fakten- Net Book 1/96 

8.3.2.2 DOB Needham International (1996); IST- 
Online-Umfrage 95/96; Fraunhofer- 
Institut; Spots Online Oct.-Dec. 1996 



8.B.2.2 Internet Usage; A Domain of the Male? 





S«x of Intornft Uftri world widt 



Six of liiltTMl Usort in GtrtniHiy 



7 % 



32% 



342 



•• ECC .• 




8.3.2.S Forecast: Users of On-line Services in Germany, 1994 - 2000 

MMnn Uun 




By the year 2000 there will be 
more than 6.5 percent of the 
German population using on-line 
services. 



S.3.2.4 Internet Usage: A Domain of the Better Educated 

Profession/Education of Internet users in Germany, 1 996 



11 % 



49 percent of all Internet users are 
students or graduate students, 
another 33 percent are white- 
collar workers. The Internet in 
Germany is still a domain of the 
better educated. 




WUtffdhr warhtr 13% 



UiwiRployiif 1% 
0t)»trt1% 

Of itwiMit 3% 
ChrH fffVBnfi/Offkioli 1% 



Pipdf 4% 






343 



Sources 

8.5.2.3 Medio Doten (1996): Net Book 

8.3.2.4 EMNID/Der Spiegel, February 1996 



•• £CC .• 




With about 70 percent of all 
Internet users in Germany being 
less than 30 years old, German 
Internet usage appears to be a 
domain of youth. 



8.3.2.S Internet Usage: A Domain of Youth? 

Age of Internet and on-line services users in Germany, 1 996 



2S'29 im] 



20-24 iim 




30-39f25X) 



Other sources, other results: With 
only 38 percent being under 30, 
but 32 percent being between 31 
and 40 years old, age groups of 
Internet users seem to be more 
balanced. 



Sources 

8.3.2.5 ST-Online-Umfrage 95/96; Fraunhofer- 
Institut; Spots Online Oct.-Dec. 1 996 

8.3.2.6 MC Online-Monitor 1 /96, Media-Daten & 
Fakten-Net Book 1/96 



S.3.2.6 Age Groups of "On-liners" 

In % of all on-line users; n = 1 0,1 46 screening interviews of which 910 
on-line users 




21 > 30 (32\) 



344 



■■ ECC .• 




S.3.2.7 Software Used Daily 

Figures in percent for Germany 



Oiitin«/Cofriinvfik<ilk»n 
Tfxl Proceiiiivg 
Programming 
EksfokaHi 
SpreadshMli 
Technkal/Sfitnt^fk App^kafloni 
Graf^hks/CAD 
Pictvri frotessing/Soiind/MIDI 
Time Plonniii^/Orgaiiiiotktn 
no loftwore 
G«m«i 

Commerdd Software 
DTP 

Educofienal Softwore 




22 



21 



It's not the video games genera- 
tion that goes on-line in Germany, 
but mostly the people who are 
working seriously with their 
computers: Text processing, pro- 
gramming and data bases are 
among the most applied software 
tools. 



8.3.2.S Most Used On-line Services in Germany 

In % of users, more than one answer possible; n = 1 ,063 in-depth-interviews 



Comptfttr mid softwmt 
Dotobosfs, arddvts, plioiitHiiformotimi 
Monty Olid stocks 
No onswtr 

Ntws, wfotktr, tcmiomy, sports 
Edocotiofi, tkMltk 
Eiitfrtaimiitiit, ItHnrt tkat 
TooHsm, troRsport 
Gomts 

Poktks ond chfil strvkts 
Cors, motorcydfs 
Constmtr goods 
Otktrs 




48.8 



Is the Internet just a tool for 
downloads? As Internet usage 
and computer literacy In Germany 
correlates, most of the Internet 
users are highly interested in 
services related to computers and 
software. 



Sources 

8.3.2J IST-Online-Umfrage 95/96; Fraunhofer- 
Institut; Online Spots Oct.-Dec. 1 996 
8.3.2.8 MC Online-Monitor 1 /%, Medio-Daten 
& Fakten - Net Book 1/96 



345 



ECC 




E-mail and software downloads are 
the most appreciated services of 
the Internet. On-line chats are only 
used by half of the Internetizens, 
but entertainment and fun are 
generally valued. 



S.3.2.9 Internet Usage in Germany, 1996 

Figures in percent 



E-Mon ■■■■■■■ 
downloodiiig softwori 
prodoct inforfiNitioii 
•RtMioiniiitfit/fiii 
rtoding mogoiiiits 
gtntrol infoniNitioii 
dotobosf rtstordi 
Itoniiig 
ofi-liftf ciiots 

trovfliiifoniiotioo 23 



66 

— 65 
64 

■■■ 62 

47 

47 

47 



I 80 

76 



Besides practical work aspects, 
Internet usage not only provides 
the feeling of being ahead of the 
crowd but also reduces TV view- 
ing and reading time. This might 
become a threat for TV broad- 
casters, as their most valued view- 
ers, the young, educated and 
affluent, are changing media 
consumption habits. 



T-Online is currently the only pro- 
vider in Germany offering com- 
puter banking services. Obviously, 
people appreciate this service. 



Sources 

8.3.2.9 MC Online-Monitor 1 /%, Medio-Doten 
&Fakten-Net Book 1/96 

8.3.2.10 Typologie der Wunsche/lntermedia 
96/97, p. 52 

8.3.2.11 MC Online Monitor 1/96; Media 
Perspektiven 9/96, p. 490 



8.3.2.10 Reasons of PC Users for Using On-line Services in 
Germany, 1996 





Il6it 


Eflft 


Mpi If Min imclkd fwrtini 


42.1 


31.1 


fa iMi kanMia 


41.4 


30.2 


kaapast ii la«dlii4Hi mw Iriadf 


41.2 


2f 2 


Iff— 111 II liriiritT 


3t.1 


m 


hah la 1*11 TV itoaiiif 


2fJ 


35.3 


paawUaa lapiti l* Vali a6a*l 


215 


217 


|l«t« a Ma| al Mif «p«i al hi 


12.1 


2tl 




1U 


1l.f 


iWarr Mlaiil «*r) af lffa| 


12.4 


1.7 


la pnit«*i Nn* 


14.1 


1.0 


hmh fa laii ra«iii| aawifapwiy BB|iian} 


1IJ 


24.5 



8.3.2.11 Usage of On-line Services in Germany 

Figures in percent, Base: 1 ,063 on-line users, 976 users of the mentioned 
on-line nets 







Cipnirn 


T-0ii» 


Mi 


iafaiMlIaa 


74.1 


12.4 


71.5 


74.4 


» 1 . j 

•ivnwaai 


554 


4lt 


37.0 


41.1 


papwial fraaaacHan 


111 


17.1 


70.J 


42.1 


faiaBi 


37.0 


51.2 


Iff 


31.2 


dlwN 


11.0 


14.3 


34.7 


24.4 


Aalapaa ylik pf*ai4art 


23.3 


17.0 


15.1 


17J 


§mm 


17.1 


11.2 


ll.f 


15.1 


alban 


t.1 


4.1 


11 


4.1 



346 





ECC 




8.3.2.12 On-line Information Interests of Germans 

Question: "For some time it has been possible to access different information - 
on-line - with a modem and via telephone lines. In which possible usages on 
this list would you be interested?" 



N«t krtirtittd 


MafUig fftil 


4SX 


* — 
MrfVi 




n% 


InUhI 1 tvittf, CMKtrti, Mvkf 


71% 


Ptn/SdnAri«/CritwJwf fti tvMilt, fliHlttt, 


73% 


Trsvif; lirfir«i«HMi ■b«rt airf Flflrtf 


27% 


Trivtfe iMkiifs, l«t«rvitlMf 


31% 




18% 


M 

mwi 


WmIW 


24% 


Gf tlii| Btwi 


34% 


Actvdi TV frffTMMMf 


23% 


S^t MW) 


m 




11% 


Pirtfriiitf if MWff^p«n wd iMfiiliii 


17% 




Fti/E-NMI 


17% 


IrMtwittlil iita 


10% 


CifMy m4 hif maiftti 


9% 


CMoWm ft SMrtI 


1% 


Stich/SlMrt yrkti 


7 % 


AArwlMif 


A4virtM lRfar»tti*a 


S% 




4% 



Homebanking is top of the list: 
Not only customers would very 
much like to handle their accounts 
at home. Probably also banks 
would like to see a growth in 
Internet-banking as it could save 
them a lot of money by down- 
sizing their number of branches. 



Sources 

8.3.2. 1 2 Stern Anzeigenobteilung: Marken Profile 
6; Media Perspektiven 9/96, p. 490 
Age: 1 4 to 64, percentage of inter- 
viewees; 

Bose: 10,033 people between 14 and 
64 years old, representing 50.86 Mio. 
in Germany 



347 



ECC 




20 percent of the German popula- 
tion could be regarded as defi- 
nitely or maybe interested in going 
on-line. A potential of at least 1 6 
million people.- Not an intercon- 
nected society yet, but a serious 
potential for business. 



8.3.2.13 Readiness for On-line Service Connections 

Question: "Are you or your household definitely planning or considering 
getting a connection to an external network within the next two years?" 









fk 


Tftd 


7 


17 


u 


WMt 


7 


13 


IS 


bft 


7 


1 


90 


S«i lUk 


3 


17 


80 


hMb 


1 


7 


97 


Aff 14-79 yMTi 


4 


11 


71 


30 - 49yMn 


7 


11 


14 


SO • 44 tmti 


0 


4 


94 


Ocmpittw li stWMf 


5 


77 


73 


wtfkiil 


7 


17 


84 


HmmIhU 3000 - 4S00/bmIIi 


7 


11 


88 


hi DM ■ ■•«/■•■* 


3 


17 


80 



Internet usage enters German 
homes: The next wave of soaring 
Internet usage could be expected, 
as PC users are planning to get 
on-line at home. 



Sources 

8.3.2. 1 3 Stem Anzeigenabteilung: Morken Profile 6; 
Media Peispektiven 9/96, p. 490 
Age: 1 4 to 64, percentage of inter- 
viewees 

Base; 10,033 people between 14 and 
64 years old, representing 50.86 Mio. 
in Germany 

8.3.2.14 Typologie der Wunsche/ Intermedia 
96/97, p. 52 



8.3.2.14 On-line Services Used in Germany Privately or at 
Work by PC Users 

Figures in percent of all PC users; planned usage within the next 1 2 month 





mm mrnt 


IMI 


mm 


rnwm 

mm 


mm 


iMiitOdbt/IOI 


OJ 


0.0 


OJ 


0.3 


0.3 


0.2 


1.0 


0.3 


Cifinfyi 


ij 


0.9 


u 


0.3 


0.4 


0.1 


1.1 


0.4 


EmftOiAM 


0.8 


0.0 


0.1 




04 


0.0 


0.5 


OJ 




SI 


5.4 


n 


II 


IS 


1.4 


4.0 


11 


Mkftnfl N*Niwk/ltSII 


It 


37 


1.4 


1.1 


0.9 


0.1 


U 


0.1 


!-Odbt/tnt 


S.0 


34 


5.1 


11 


IS 


04 


1.1 


10 




31 


37 


19 


13 


1.4 


1.0 


IJ 


0.7 


Mrrwtiy hI nlif m Im wvkn 


4».1 


459 


149 


71.4 


- 


“ 


- 


- 


m flpn rt PH m in MmkH wMb tke 
12 


- 


- 


- 


- 


343 


430 


359 


413 


Di Im i»h Mil 


14.2 


135 


17.1 


7J 


5.5 


1.0 


11 


SI 



348 



ECC 




8.4 Internet • Economics 



8.4.1 Inlernel Revenues 

8.4.1. 1 Forecast: Worldwide Number and Value of Internet 
Transactions Compared with Credit Card 







1 




tTonMffioiit (090 ir) 




7.0 


17.0 


vdetfOOOinUSS) 


m 


600 


1750 


vfb« ptr trqiuctiH (US$) 


- 


8571 


73.53 


cord rromocfta (000m) 


n 


U.S 


30.S 



7 billion Internet transactions with 
an average value of 85.71 dollars 
are estimated to turn the Internet 
by the year 2000 into a medium 
transferring services and goods 
worth 600 billion dollars. 



8.4. 1.2 Forecast: Worldwide Number of Internet Transactions 
by Type in the Year 2000 

In millions 



prMbn cri* cir6 


1750 




1,400 


flfctrwik cfcipti 


1,050 


»cind oi«t /MH 


700 


poto of nlf loq» 


350 


8lAw4fd 8CC188II 


350 


IIT iystifltt 


350 


nptr MHnrds 


350 


fodfiBt wkf trwftr 


210 


itofid oiiw iiodli 


140 


ATM dofl¥Otts 


70 


Otlttf 


280 


Ttfil 


7,000 



Credit cards are expected to be 
the transaction tool of choice for 
Internet commerce by the year 
2000 . 



Sources 

8.4. 1.1 Killen & Associates, Screen Digest July 
1 996 

8.4.1.2 EIT0 (1996) 



349 



ECC 




With a total 1 23.6 million dollars 
from Internet revenues in 1996, 
the size of Internet related com- 
merce is once again estimated to 
be small. By the year 2000 this 
figure could rise to 920 million 
dollars. Interactively appears in 
this respect even less relevant.